What is the optimal ownership policy

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Reference no: EM131809928

A 2000-pound, counter-balanced, electric forklift can be purchased for $25,000 plus $3000 for the charger and $3000 for a battery. The forklift's market value is 10% less for each of its first 6 years of service. After this period, the market value declines at the rate of 7.5% for the next 6 years.

The battery has a life of 4 years and a salvage value of $300. The charger has a 12-year life and a $100 salvage value. The charger's market value declines 20% per year of use. The battery's market value declines by 30% of its purchase price each year. Maintenance of the charger and battery are minimal. The battery will most likely not work with a replacement forklift.

Maintenance of the forklift is $200 per year during years 1 and 2 while the warranty is in place. In year 3, it jumps to $600 and increases $50 per year thereafter. What is the optimal ownership policy? (i = 10%)

Reference no: EM131809928

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