Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 47

A CNC milling machine purchased by Proto Tool and Die 10 years ago for $75,000 can be used for 3 more years. Estimates are an annual operating cost of $63,000 and a salvage value of $25,000. A challenger will cost $130,000 with an economic life of 6 years and an operating cost of $32,000 per year. Its salvage value will be $45,000. On the basis of these estimates, what market value for the existing asset will render the challenger equally attractive Use an interest rate of 12% per year.