D Question 1 1 pts A computer system is to be acquired The purc chase price of t

Question

D Question 1 1 pts A computer system is to be acquired The purc chase price of the system has been quoted at $55,000, and the system will reduce annual expenses by $20,.00 per have increased at an average rate of 8% per year, and this is expected to continue into the future year in real dollars. Historically, these annual expenses an average ra Maintenance services will be contracted for, and their cost per year (in actual dollars) constant at $3 500 Assume f: 8% per year, MARR-25% per year (w What is the minimum (integer value) life of the system such that the new computer can be economically justfied? The computer's market valse is zevro at allsme O 6 years 5 years 4 years O 3 years 2 years

Explanation / Answer

Solution :- Cost of the Machine = 55000 Net Saving per year Reduction in annual exp - Maintenance Exp (20000 - 3500) = 16500 The MARR = 25% Therefore the minimum life so that machine is economically justified Year Cost Made Savings PVF@25% PV Cumulative savings 0 55000 1 55000 1 16500 0.8 13200 13200 2 16500 0.64 10560 23760 3 16500 0.512 8448 32208 4 16500 0.4096 6758.4 38966.4 5 16500 0.32768 5406.72 44373.12 6 16500 0.262144 4325.376 48698.5 7 16500 0.209715 3460.301 52158.8 Now the Discounted PBP = 6 + (50000-48698.5) / (52158.8-48698.5) 6 + 1301.51/3460.301 6.376126 years Therefore the answer we say 6 years that means option (i) is correct Assume that savings is fixed as here nothing is given that there is a change in the savings also Feel Free to ask any query through comments

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