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A specialty concrete mixer used in construction was purchased for $3

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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.
Show the EUAC values used to make your decision:
Use the cash flow approach (insider
Solution
For Existing Mixer
PW of initial cost =300000/P.V Annuity factor (15
years@15%) =300000/5.847=51308.36
PW of Salvage value=5000/F.V Annuity(8 years@15%)
=5000/13.727=364.25
Annual O&M cost=105000
EUAC=PW of initial cost -PW of salvage value+ Annual
Q&M cost

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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 ...
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