What are the solutions to this problem? Thanks! A manufacturing company is repla

Question

What are the solutions to this problem? Thanks!

A manufacturing company is replacing a heavy machine that was used for the past ten years with its newer computer-controlled model. This machine was purchased tor $100,000 ten years ago and today its salvage value is $10,000. The maintenance cost of the machine was S2.000 in the first year and increased by 8% each year. The machine broke down in its sixth year of operation and it cost the company $10,000 to get the machine repaired that year. Interest rate is 5% per year. What is the total cost of operating this machine at the end of its ten year lifespan? What is the annual cost of operating this machine over its ten year lifespan?

Explanation / Answer

total cost=10^5-10^4+2000*(1+0.08)^(10)+10^4=$1.043*10^5

b)annual cost=total cost/10=$1.043*10^4

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