In a replacement analysis problem, the following information is available Initial cost : 12.000 YTL Annual maintenance cost: None in the first three years 2.000 YTL at the end of the 4th year 2.000 YTL at the end of the 5th year 2,500 YTL per year after the 5th year will increase smoothly (at the end of the 6th year, 4.500 YTL 7.000 YTL at the end of the 7th year, etc. The scrap value in any given year is zero. Take the discount rate of 10% and ignore income taxes. Calculate the most economical life for this candidate equipment. A) 6 B) 2 C) 5 D) 8 E) 4
In a replacement analysis problem, the following information is available Initial cost : 12.000 YTL Annual maintenance cost: None in the first three years 2.000 YTL at the end of the 4th year 2.000 YTL at the end of the 5th year 2,500 YTL per year after the 5th year will increase smoothly (at the end of the 6th year, 4.500 YTL 7.000 YTL at the end of the 7th year, etc. The scrap value in any given year is zero. Take the discount rate of 10% and ignore income taxes. Calculate the most economical life for this candidate equipment. A) 6 B) 2 C) 5 D) 8 E) 4
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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In a replacement analysis problem, the following information is available
Initial cost : 12.000 YTL
Annual maintenance cost: None in the first three years
2.000 YTL at the end of the 4th year
2.000 YTL at the end of the 5th year
2,500 YTL per year after the 5th year
will increase smoothly (at the end of the 6th year, 4.500 YTL
7.000 YTL at the end of the 7th year, etc.
The scrap value in any given year is zero. Take the discount rate of 10% and ignore income taxes. Calculate the most economical life for this candidate equipment.
A) 6
B) 2
C) 5
D) 8
E) 4
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