The following table is used to make a replacement decision regarding a piece of
ID: 1155695 • Letter: T
Question
The following table is used to make a replacement decision regarding a piece of engineering equipment:
Year
Salvage Value
Maintenance Costs
EAC (Capital Costs)
EAC (Maintenance Costs)
Total
1
$38,450
$4,200
$38,022
$4,200
$42,222
2
19,580
8,100
30,733
6,057
36,790
3
16,520
15,260
22,964
8,837
31,802
4
27,560
19,456
12,872
32,327
5
9,210
49,500
16,831
18,871
35,702
What is the Salvage Value for the 4th year at a MARR of 10%?
Question 2 options:
$11,000
$11,700
$11,300
$11,900
$11,500
Year
Salvage Value
Maintenance Costs
EAC (Capital Costs)
EAC (Maintenance Costs)
Total
1
$38,450
$4,200
$38,022
$4,200
$42,222
2
19,580
8,100
30,733
6,057
36,790
3
16,520
15,260
22,964
8,837
31,802
4
27,560
19,456
12,872
32,327
5
9,210
49,500
16,831
18,871
35,702
Explanation / Answer
Answer is 11500 Explanationn: For first year EUC: 38022 Net present value will be 34566 (38022*0.9091) Present value of Salvage 34955 (38450*0.9091) Initial Investment 69521 Now in 4th Year: EUC 19456 Multiply: Annnuity factor for 4yrs 3.1699 Net Present value 61673.57 Less: Initial Investment 69521 Present value of salvage 7847.426 Divide: PVF of 4th year 0.683 Salvage value 11489.64
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