Equipment purchased 2 years ago by Newport Corporation to make pneumatic vibration isolators cost $123,000. It has a market value that can be described by. the relation $123,000 - $7,600k, where k is the years from time of purchase. The operating cost for the first 5 years is $52,000 per year, after which it increases by $6,000 per year. The asset's salvage value was originally estimated to be $7000 after a predicted 10-year useful life. Determine the values of P, S, and AOC if (a) a replacement study is done now and it is assumed that the equipment will be kept a maximum of one more year, and (b) a replacement study is done 5 years from now and it is assumed that the equipment will be kept a maximum of only one more year after that. a) The value of Pis $ The value of Sis$__ The value of AOC is $. b) The value of Pis $. The value of 5 is $ The value of AOC is $.

Equipment purchased 2 years ago by Newport Corporation to make pneumatic vibration isolators cost $123,000. It has a market value that can be described by. the relation $123,000 - $7,600k, where k is the years from time of purchase. The operating cost for the first 5 years is $52,000 per year, after which it increases by $6,000 per year. The asset's salvage value was originally estimated to be $7000 after a predicted 10-year useful life. Determine the values of P, S, and AOC if (a) a replacement study is done now and it is assumed that the equipment will be kept a maximum of one more year, and (b) a replacement study is done 5 years from now and it is assumed that the equipment will be kept a maximum of only one more year after that. a) The value of Pis $ The value of Sis$__ The value of AOC is $. b) The value of Pis $. The value of 5 is $ The value of AOC is $.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 9P

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