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What is the optimal economic life and associated eac

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Problem 1: Packaging problem a. A packaging machine that has been used for 2 years has a salvage value of $12,000 now which will drop by $2000 per year. Over the next 5 years, the maintenance costs for the machine are expected to be $2500, $2900, $3500, 4500, and 4500. If the MARR is 8%, determine the marginal cost to extend service for each of the next 5 years.

Hint: MC2 = $5700

Problem 2: A replacement piece of equipment can be purchased for the machine above at a first cost of $25,000. Annual maintenance costs the first year are expected to be $1000 and increase by $300 each year. If this equipment were to be sold after 1 year, income of 20,000 could be realized. Each year the machine is kept, the salvage value would decrease by $3500. What is the optimal economic life and associated EAC of this equipment?

Hint: EAC3=$6981

Problem 3: Should the new equipment be purchased now? Why?

Reference no: EM132662388

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