A milling machine purchased by a machine tool company 12 years ago for $75,000 can be used
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Question:
A milling machine purchased by a machine tool company 12 years ago for $75,000 can be used for up to 2 years but only if upgraded at a cost of approximately $10,000. Otherwise, the estimated market values and operating cost shown below will apply. A challenger will cost $130,000 and have a maximum life of 3 years. It's market value and operating cost estimates are shown below. The machine tool company uses an interest rate of 12%/year in its economic decision making.
1)WHAT IS THE ECONOMIC SERVICE LIFE OF THE PROPOSED REPLACEMENT MACHINE?
2)WHAT IS THE RECOMMENDED COURSE OF ACTION?
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