Economics
An injection molding system has a first cost of $175,000 and an annual operating cost of $75,000 in years 1 and 2, increasing by $5,500 per year thereafter. The salvage value of the system is 25% of the first cost regardless of when the system is retired within its maximum useful life of 5 years. Using a MARR of 11% per year, determine the ESL and the respective AW value of the system.
The ESL is year(s) and AW value of the system is $ .
Homework Answers
The ESL is ONE year(s) and the AW value of the system is $-$121022.94.
Note - The cash outflow of 5th year is -91500 but it is net of the cash inflow from salvage value of $43750 ( i.e $175000 * 25% ) so, -91500 + 43750 = -47750.
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