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Question:

Big-J Construction Company, Inc. is conducting a routine periodic review of existing field equipment. They use a MARR of 20%. This includes a replacement evaluation of a paving machine now in use. The machine was purchased 5 years ago for $200,000, The pavers current market value is $65,000, and yearly operating and maintenance costs are as follows.

Data for a new paving machine have been analyzed. Its most economic life is at 8 years, with a minimum EUAC of $62,000. When should the existing paving machine be replaced?

13-37 Find Total MC for Years 1, 2, 3, 4, and 5. Determine the year the Defender should be replaced. MARR = 0.20 EUAC Challenger = $62,000 Calculate the 3 components of Total MC & label the corresponding 3 columns Mainten- Year Salvage Value Operating Cost Total MC ance Cost 0 1 W N 2 3 4 65000 50000 40000 35000 30000 25000 17000 20000 25000 30000 35000 12000 18000 20000 25000 30000 5 Should the Defender be replaced this year (year 1)? If not, in what year should it be replaced? 13-37 Find Total MC for Years 1, 2, 3, 4, and 5. Determine the year the Defender should be replaced. MARR = 0.20 EUAC Challenger = $62,000 Calculate the 3 components of Total MC & label the corresponding 3 columns Mainten- Year Salvage Value Operating Cost Total MC ance Cost 0 1 W N 2 3 4 65000 50000 40000 35000 30000 25000 17000 20000 25000 30000 35000 12000 18000 20000 25000 30000 5 Should the Defender be replaced this year (year 1)? If not, in what year should it be replaced