please solve manually (25Pts.) I. Last year a dentist made the decision to keep

Question

please solve manually

(25Pts.) I. Last year a dentist made the decision to keep some existing X ray diagnosis equipment for another year(this year) instead of purchasing a new X-ray unit for $15,000. Using "one additional year replacement analysis" and the data below that is now known, determine whether the dentist made the correct economic decision at an investment rate of 18% per year. (Lecture 12-row cwAAT-WGwA16 6u'ae) Existing Equipment for Last Year $3,000 Trade-in Value last year Market Value this year$2,000 $500 Operating Cost last yea New Equipment if bought last year 5.000 n 10 yrs SV after 10 yrs $1,000 AOC $3,000

Explanation / Answer

Last Year Value of Machine 3000 $ Currnt Year value of machine 2000 $ Operation Cost last year 500 $ New Machine 15000 $ Salvage Value 1000 $ Useful Lfe 10 Years AOC 3000 $ 0 1 2 3 4 5 6 7 8 9 10 Initial Cost 15000 Maintenace - AOC 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 Residual Value 1000 Net Cash Flow -15000 -3000 -3000 -3000 -3000 -3000 -3000 -3000 -3000 -3000 -2000 Discont Facotor (1/(1+r)^n) @ 18% 1 0.847458 0.718184 0.608631 0.515789 0.437109 0.370432 0.313925 0.266038 0.225456 0.191064 Present Values (net cash flow x discount factor) -15000 -2542.37 -2154.55 -1825.89 -1547.37 -1311.33 -1111.29 -941.775 -798.114 -676.368 -382.129 Net Present -28291.2 $ Owner Ship Benefit 10 Yrs Annuity Factor for 10 yrs for 18% =(1+18%)^10 Annuity Factor for 10 yrs for 18% 5.233836 Equivalent Annual cost -5405.44 $ If replaced the Equvalanet annual cost would be 5405$ for new machine whereas the doctor had actual outggo of 1500$ i.e. 500$ on opex and $1000 loss on salvage value. Dentist has made right decision

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