Question

EXAMPLE 5 A machine that cost ZAR 120,000 three years ago can be sold now for ZAR 54,000. Its market value for the next 2 years is expected to be ZAR 40,000 and ZAR 20,000 one year and 2 years from now, respectively. Its operating cost was ZARI8,000 for the first 3 years of its life, but the M&O cost is expected to be ZAR 23,000 for the next 2 years. A new improved machine that can be purchased for ZAR 138,000 will have an economic life of 5 years, an operating cost of ZAR 9000 per year, and a salvage value of ZAR 32,000 after 5 years. At an interest rate of 10% per year, determine if the presently owned machine should be replaced now, I year from now, or 2 years from now.

Please help in determinimg the retention and replacement decisions

Answer 1

fnd Aw defender keeping one oy too more years and ompave againcb Aui challenger WDI_-54,000(A!아,')-23,000+40,000(슬丿10%, ) 54,000 C1.lo)-23,00040,000 = $-4 ,400 AWDF-54,000 ( 10%,2)-25,000+40,000逄, loy,,2) ー-54,000(0与无19)-23,000+20,000(0.47619 Awle=-138,000(+, 10%, 5)-9000+4,000( '01,5) 18,00060 36300+3000 (0.163go) _40, 163 Replace the defender oith the challenger noo