Equipment purchased 2 years ago by Newport Corporation to make pneumaticvibration isolators cost $110,500. It has a market value that can be describedby the relation $110,500 – $8,600k, where k is the years from time ofpurchase. The operating cost for the first 5 years is $63,000 per year, afterwhich it increases by $6,800 per year. The asset's salvage value was originallyestimated to be $7000 after a predicted 10-year useful life. Determine thevalues of P, S, and AOC if (a) a replacement study is done now and it isassumed 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 theequipment will be kept a maximum of only one more year after that.a)The value of Pis $The value of S is $The value of AOC is $b)The value of Pis $The value of S is $The value of AOC is $

A)cost of vibration isolators - $110500Market value - $110500 - $8600KOperating cost = $63000 per…

Answered: Equipment purchased 2 years ago by…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 14P

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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 Š6,000 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 S is $ The value of AOC is $ b) The value of Pis $ The value of S is $ The value of AOC is $
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