The Gooey Glue Co. production manager purchased a stainless steel mixing tank at
ID: 1105964 • Letter: T
Question
The Gooey Glue Co. production manager purchased a stainless steel mixing tank at auction for $15,000. Because it was a good deal, she estimates the tank can be sold at any time for the purchase price of $15,000, even if the mixer machinery isn’t working. The machinery needs $2000 in repairs now and is expected to cost $500 during the next year to operate. It seems likely that this cost will increase by another $500 ever year for the next few years. What is the optimum economic service life that can be used in a replacement analysis based on a 15% per year MARR?
Explanation / Answer
Purchase price of the tank is 15000
Add the additiional expected expenses of 2000+500
Therefore, the total cost is 17500 Plus 500 every year for few years...
every year 15% MARR is 18000 * 15/100 . ...2700
so the optimum econmic service life is 2700/2500 is 1.08. (total benefits divided by total cost)
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