Compute net present value of life cycle cost of acquisition

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Reference no: EM131621925

There is a ten-year contract with the to deliver washing machines to housing. To satisfy the demand, the company must acquire five special machines each of which costs $1,000,000. The acquisition cost will be paid in FY 2000. Each machine will be used for 12 hours a day over 250 days a year from FY01 through FY20. The MTBF of the machine is 500 hours and the repair cost is $10,000/failure. Preventive maintenance is required every 3 months, and the cost per preventive maintenance per machine is $20,000. The salvage value is $0. Compute the net present value of the life cycle cost of acquisition and preventive maintenance of these special machines in FY00 dollars. Use the capital discount rate of 15%.

Reference no: EM131621925

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