An automobile company currently owns an assembly machine, which was originally purchased and installed for $200,000....

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An automobile company currently owns an assembly machine, which was originally purchased and installed for $200,000. The current market value of the machine is $75,000. The Operating and Maintenance (O&M) cost for this assembly machine is $10,000 in year 1 and it increases by $1,000 every year after that for the remaining four years of its useful life. This machine market value is $40,000 if it is replaced two years from now, and it is worth $15,000 at the end of its useful life (four years from now). A replacement assembly machine can be bought and installed for $250,000. The O&M for this machine is $8,000 per year. Its market value for the next three years of its useful life have been given below: Year 1 2 3 Market Value at the end of year, $ $75,000 $40,000 $10,000 If the MARR is 5%, determine when the best time to replace the current machine is. An automobile company currently owns an assembly machine, which was originally purchased and installed for $200,000. The current market value of the machine is $75,000. The Operating and Maintenance (O&M) cost for this assembly machine is $10,000 in year 1 and it increases by $1,000 every year after that for the remaining four years of its useful life. This machine market value is $40,000 if it is replaced two years from now, and it is worth $15,000 at the end of its useful life (four years from now). A replacement assembly machine can be bought and installed for $250,000. The O&M for this machine is $8,000 per year. Its market value for the next three years of its useful life have been given below: Year 1 2 3 Market Value at the end of year, $ $75,000 $40,000 $10,000 If the MARR is 5%, determine when the best time to replace the current machine is.

Answer rating: 100% (QA)

Details given for option 1 ie Replace now Option1 Replace machine Now sale value of old machine 7500000 cost of new machine 25000000 Operating cost Ye... View the full answer