An existing drill press has a salvage value now of $5000, which will fall to $4000 by the end of the year. The cost of lower productivity using this drill press is $3000 this year. A new-fangled drill press, being considered as a replacement, has the following salvage values and loss of productivity:

Year	Salvage	Productivity Loss
0	$12,000
1	$9000	$0
2	$7000	$1000
3	$5000	$2000
4	$3000	$3000

Assume an interest rate of 15%. Calculate the EUAC for each year of the new-fangled drill press. Calculate the marginal cost of the existing drill press. In what year does the new-fangled drill press’ EUAC fall below the marginal cost of the existing drill press and what is the amount of the new-fangled drill press’ EUAC of that year?

Answer rating: 100% (QA)

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