Equipment that was purchased by Newport Corporation for making pneumatic vibration isolators cost $90,000 two years ago. It has a market value that can be described by the relation $90,000 − 8000k, where k is the years from time of purchase. The operating cost for the first 5 years is $65,000 per year, after which it increases by $6300 per year. The asset’s salvage value was originally estimated to be $7000 after a predicted 10-year useful life. Determine the values of P, S, and AOC if (a) a replacement study is done now and it is assumed that the equipment will be kept a maximum of only 1 more year, and (b) a replacement study is done 1 year from now and it is assumed that the equipment will be kept a maximum of only 1 more year after that.
Equipment that was purchased by Newport Corporation
for making pneumatic vibration isolators cost
$90,000 two years ago. It has a market value that can
be described by the relation $90,000 − 8000k, where
k is the years from time of purchase. The operating
cost for the first 5 years is $65,000 per year, after
which it increases by $6300 per year. The asset’s salvage
value was originally estimated to be $7000
after a predicted 10-year useful life. Determine the
values of P, S, and AOC if (a) a replacement study
is done now and it is assumed that the equipment
will be kept a maximum of only 1 more year, and (b)
a replacement study is done 1 year from now and it
is assumed that the equipment will be kept a maximum
of only 1 more year after that.
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