Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 17

The maintenance and operation (M O) cost of front-end loaders working under harsh environmental conditions tends to increase by a constant $1200 per year for the first 5 years of operation. For a loader that has a first cost of $39,000 and first-year M O cost of $17,000, compare the equivalent annual worth of a loader kept for 4 years with one kept for 5 years at an interest rate of 12% per year. The salvage value of a used loader is $23,000 after 4 years and $18,000 after 5 years.