A mechanical equipment costed $30,000 when purchased. The engineer estimated that maintenance cost for the equipment during
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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.
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