Question: A construction company wants to determine the optimal replacement policy for the earth mover it owns. The company has a policy of not keeping an

A construction company wants to determine the optimal replacement policy for the earth mover it owns. The company has a policy of not keeping an earth mover for more than five years, and has estimated the annual operating costs and trade-in values for earth movers during each of the five years they might be kept as:

Assume that new earth movers currently cost $25,000 and are increasing in cost by 4.5% per year. The company wants to determine when it should plan on replacing its current, 2-year-old earth mover. Use a 5-year planning horizon.
a. Draw the network representation of this problem.
b. Write out the LP formulation of this problem.
c. Solve the problem using Solver. Interpret yoursolution.

Age in Years 2-3 0-1 1-2 3-4 4-5 Operating Cost $8,000 %9,100 $10,700 9,200 $11,000 Trade-in Value $14,000 9,000 $6,000 $3,500 $2,000

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