A Stamping Machine Currently Has a Salvage Value of $10

question 19

Multiple Choice

A stamping machine currently has a salvage value of $10 000, and this will drop by 20% per year from now on. Its expected maintenance costs are $1 000 for this year, but in the following year it is expected to need a major overhaul, costing $3 500. In the year following the overhaul, its maintenance costs will be $500, and these will then go up by 30% per year. Your MARR is 10%. There is a challenger available that will do the same job for an EAC of $3 400. When should you replace the old machine?

• A)right now
• B)in two years time
• C)in four years time
• D)in six years time
• E)in eight years time

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Definitions:

Centration

A cognitive limitation in young children's thinking, marked by focusing on one aspect of a situation while neglecting others, characteristic of the preoperational stage.

Conservation Skills

Cognitive abilities that enable a child to understand that quantity or amount does not change when its form or appearance is altered, a concept developed by Jean Piaget.

Preoperational Thought

A stage in Piaget's theory of cognitive development where children (ages 2-7) begin to engage in symbolic play and struggle with logic and understanding others' perspectives.

Intuitive Reasoning

The process of making decisions on the basis of what feels right or what is instinctively believed to be true without logical reasoning.