Cushman Manufacturing Company has a five-year-old vertical numerical chucker (VNC) that has a current market value of $5,000 and expected O&M costs of $3,000 this year, which increase by $1,500 per year. Future market values are expected to decline by $1,000 per year. The VNC machine can be used for another three years. The challenger costs $10,000 and has O&M costs of $2,000 per year, which increase by $1,000 per year. The machine will be needed for only three years, and the salvage value at the end of the three years is expected to be $4,000. The MARR is 15%.(a) Determine the annual cash flows for retaining the old VNC machine forthree years.(b) Determine whether now is the best time to replace the old machine.
Cushman Manufacturing Company has a five-year-old vertical numerical chucker (VNC) that has a current market value of $5,000 and expected O&M costs of $3,000 this year, which increase by $1,500 per year.
(a) Determine the annual cash flows for retaining the old VNC machine for
three years.
(b) Determine whether now is the best time to replace the old machine.
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