A machine that is currently used in manufacturing circuit board card locks has AW = $-63,000 per

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A machine that is currently used in manufacturing circuit board card locks has AW = $-63,000 per year. A possible replacement is under consideration with a first cost of $64,000 and an operating cost of $38,000 per year for the next 3 years. Three different engineers have given their opinion, about what the salvage value of the new machine will be 3 years from now: $10,000, $13,000, and $18,000. Is the decision to replace the machine sensitive to the salvage value estimates at the company's MARR of 15% per year?


Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
MARR
Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...
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Engineering economy

ISBN: 978-0073376301

7th Edition

Authors: Leland Blank, Anthony Tarquin

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