When should the plant consider replacing machine

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Reference no: EM131186417

A plant (in a corporation with a MARR = 10%) has an existing Machine (Machine 007) on their plant floor with a current market value of $176,000. Based on auction price data from similar machines, the estimated market values over the next three years are $152,000, $120,000, and $80,000 respectively. Annual R & M costs are $36,000 in present dollars but estimated to increase at an annual rate of 4.1% over the next three years. The Challenger Machine has a 6-year economic life with an EUAC = $88,420 over this time frame. Given the above, when should the plant consider replacing Machine 007 with the Challenger Machine?

Reference no: EM131186417

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