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Machine X costs $20,000 with annual maintenance costs of $700/year and a salvage value of $3000...

Machine X costs $20,000 with annual maintenance costs of $700/year and a salvage value of $3000 at the end of a 5 year useful life. Machine Y costs $30,000 with $500 maintenance cost the first year, $575 the 2nd year, increasing by $75 each following year. There is a salvage value of $8000 at the end of a 10-year useful life. Assume these machines will be needed for at least 20 years. Assume that the costs will not change during that period, except the maintenance for machine Y described above. Determine the annual equivalent cost for each system using 6% interest.

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Answer #1

The equivalent annual cost over 20 years will be same as the equivalent annual costs of machine over their useful life.

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