A machine that cost $120,000 3 years ago can be sold now for $52,750. Its market value is expected to be $40,000 and $20,000 1 year and 2 years from now, respectively. Its operating cost was $18,000 for the first 3 years of its life, but the M&O cost is expected to be $23,000 for the next 2 years. A new improved machine that can be purchased for $136,750 will have an economic life of 5 years, and an operating cost of $9,000 per year, and a salvage value of $32,000 whenever it is replaced. At an interest rate of 10% per year, determine if the presently owned machine should be replaced now, 1 year from now, or 2 years from now. The annual worth of the existing machine one year from now is $- now is $- ], and the annual worth of the new machine is $- The presently owned machine should be replaced (Click to select) the annual worth of the existing machine two years from

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Question
A machine that cost $120,000 3 years ago can be sold now for $52,750. Its market value is expected to be $40,000 and $20,000 1
year and 2 years from now, respectively. Its operating cost was $18,000 for the first 3 years of its life, but the M&O cost is expected to
be $23,000 for the next 2 years. A new improved machine that can be purchased for $136,750 will have an economic life of 5 years,
and an operating cost of $9,000 per year, and a salvage value of $32,000 whenever it is replaced. At an interest rate of 10% per year,
determine if the presently owned machine should be replaced now, 1 year from now, or 2 years from now.
The annual worth of the existing machine one year from now is $-
now is $-
], and the annual worth of the new machine is $-
The presently owned machine should be replaced (Click to select)
the annual worth of the existing machine two years from
Transcribed Image Text:A machine that cost $120,000 3 years ago can be sold now for $52,750. Its market value is expected to be $40,000 and $20,000 1 year and 2 years from now, respectively. Its operating cost was $18,000 for the first 3 years of its life, but the M&O cost is expected to be $23,000 for the next 2 years. A new improved machine that can be purchased for $136,750 will have an economic life of 5 years, and an operating cost of $9,000 per year, and a salvage value of $32,000 whenever it is replaced. At an interest rate of 10% per year, determine if the presently owned machine should be replaced now, 1 year from now, or 2 years from now. The annual worth of the existing machine one year from now is $- now is $- ], and the annual worth of the new machine is $- The presently owned machine should be replaced (Click to select) the annual worth of the existing machine two years from
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