A Machine Lasts 3 Years and Has a Purchase Price

question 22

Short Answer

A machine lasts 3 years and has a purchase price of $100. It costs $40 per year to operate and can be sold as junk for $15 at the end of its life. What is the EAC of the costs of operating a series of such machines into perpetuity if the discount rate is 15%?

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Definitions:

Market Share

The percentage of an industry's sales that a particular company secures over a specific time period.

Boston Consulting Group (BCG)

A global management consulting firm known for its expertise in business strategy and the development of the BCG matrix.

Portfolio Analysis

An assessment method used by businesses to evaluate the different elements of their product range to optimize strategic decisions.

Product Penetration

The extent to which a product is recognized and bought by customers in a particular market.