Question

Chapter 11, Problem 30P (2 Bookmarks) Show all steps ON Problem Replacement Study A presently owned machine has the projected market value and M&O costs shown below. An outside vendor of services has offered to provide the service of the existing machine at a fixed price per year. If the presently owned machine is replaced now, the cost of the fixed-price contract will be $33,000 per year. If the presently owned machine is replaced next year or any time after that, the contract price will be $35,000 per year. Determine if and when the defender should be replaced with the outside vendor using an interest rate of 10% per year. Assume used equipment similar to the defender will always be available, but that the current equipment will not be retained more than three additional years M&O Cost, Market Value, $per Year Retention Yea 32,000 25,000 4,000 0,000 8,000 24,000 25,000 26,000

Answer 1