A mechanical equipment costed $30,000 when purchased. The engineer estimated that maintenance cost for the equipment during the first year will be $1000. As the equipment ages, maintenance costs are expected to increase at a fixed cost of $250 per year over the remaining life. Revenue generated by the equipment is estimated to be $5000 annually. Some major parts of the equipment need to be replaced every fourth year to minimize deterioration and it will cost additional $2500. Salvage value of the equipment is expected to be $11000 at the seventh year. Construct the cash flow diagram and also calculate total value at the seventh year.

Answer rating: 100% (QA)

The cash flow diagram is as shown below The cash flow diagram below is obtained by ded... View the full answer