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Five years ago your company purchased some equipment for $125,000. The annual costs for operating and...

Five years ago your company purchased some equipment for $125,000. The annual costs for operating and maintaining the equipment are $1500 a year and today's market value is $75,000 decreasing by 10% of original cost per year. What analysis can be done for the remaining life of this equipment and what is the value you would use for the next year if MARR = 12%?  of $

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Answer #1

The question is based on the concept of calculation of annual worth of the machine

AW= Purchase price*(A/P, Rate, time) – Scrap (A/F, Rate, time) – Annual operating cost

The annual worth calculation is a method to find the value for the machine.

The price of machine which was purchased 5 year ago= $ 125,000

Annual depreciation = 10% ,

Life of machine = 10 year

Annual operating cost = $ 1500

MARR= 12% with Scrap value

Calculation for first 5 years as

Value of machine after 1 year,

Today value – Annual value = 75000-21370 = $ 53.630

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