A company buys a machine costing $75,000.The machine has no scrap value at the end of its estimated lifetime of 15 years.It has annual maintenance expenses of $1000,and is expected to produce 2000 units per year.The capitalized cost of the machine at j₁ = 7% is $131,922.72.The company wishes to increase the machine's productivity by 10% per year.If this is done,the cost,estimated lifetime and scrap value remain unchanged,but maintenance costs will increase by $X per year.What is the value of X?

Question

Quizplus · Accepted Answer

The correct answer is A because the capitalized cost of the machine at j1 = 7% is $131,922.72. The company wishes to increase the machine's productivity by 10% per year. If this is done, the cost, estimated lifetime and scrap value remain unchanged, but maintenance costs will increase by $X per year. The value of X is $923.45.

A Company Buys a Machine Costing $75,000