Show work. Question1 A specialty concrete mixer used in construction was purchas

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Question1 A specialty concrete mixer used in construction was purchased for $300,000 7 years ago. Its annual O&M; costs are $105,000. At the end of the 8-year planning horizon, the mixer will have a salvage value of $5,000. If the mixer is replaced, a new mixer will require an initial investment of $375,000. At the end of the 8-year planning horizon, it will have a salvage value of $45,000. Its annual O&M; cost will be only $40,000 due to newer technology. Analyze this using an EUAC measure and a MARR of 15% to see if the concrete mixer should be replaced if the old mixer is sold for its market value of $65,000 Click here to access the TVM Factor Table Calculator Your answer is incorrect. Try again. Use the cash flow approach (insider's viewpoint approach) Show the EUAC values used to make your decision: 104563 Existing concrete mixer: $ 94161 New concrete mixer: $ Carry all interim calculations to 5 decimal places and then round your final answer to the nearest dollar. The tolerance is ±50. Yes Replace concrete mixer?

Explanation / Answer

Old mixer has only 8 years left. Hence its EUAC is = 65000(A/P, 15%, 8) - 5000(A/F, 15%, 8) + 105000

= 0.22285*65000 - 5000*0.07285 + 105000 = 119121

Find the EUAC of new mixer

=  375000(A/P, 15%, 8) - 45000(A/F, 15%, 1) + 40000

= 375000*0.22285 - 45000*0.07285 + 40000 = 120291

Since EUAC of old mixer is less than that of new machine, the machine should not be replaced.

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