Contemporary Engineering Economics 6th Edition by Chan Park

Exercise 28

Four years ago, an industrial batch oven was purchased for $23,000. It has been depreciated over a 10-year life and has a $1,000 salvage value. If sold now, the machine will bring $2,000. If sold at the end of the year, it will bring $1,500. Annual operating costs for subsequent years are $3,800. A new machine will cost $50,000 with a 12-year life and have a $3,000 salvage value. The operating cost will be $3,000 as of the end of each year with $6,000-per-year savings due to better quality control. If the firm's MARR is 14%, should the machine be purchased now