Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 46

A machine that cost $120,000 three years ago can be sold now for $54,000. Its market value for the next 2 years is expected to be $40,000 and $20,000 one year and 2 years from now, respectively. Its operating cost was $18,000 for the first 3 years of its life, but the M O cost is expected to be $23,000 for the next 2 years. A new improved machine that can be purchased for $138,000 will have an economic life of 5 years, an operating cost of $9000 per year, and a salvage value of $32,000 after 5 years. At an interest rate of 10% per year, determine if the presently owned machine should be replaced now, 1 year from now, or 2 years from now.