The Plant department of the local telephone company purchasedfour special pole hole diggers eight years ago for $14,000 each.They have been in constant use to the present time. Due to anincreased workload, it is considered that additional machines willsoon be required. Recently it was announced that an improved modelof the digger has been put on the market. The new machines havehigher production rate and lower maintenance expense than the oldmachines, but their cost will be $32,000 each. The service life ofthe new machines is estimated to be 8 years with salvage estimatedat $750 each. the four original diggers have an immediate salvageof $2,000 each and an estimated salvage of $500 each eight yearshence. The estimated average annual maintenance expense associatedwith the old machines is approximately $1,500 each compared to $600each for the new machines. A field study and trial indicates thatthe workload would require three additional new type machines ifthe old machines are continued in service. However, if the oldmachines are all retired from service, the present workload plusthe estimated increased load could be carried by 6 new machineswith an annual savings of $12,000 in operator costs. Because thenew machines employ a new principle of operation, it iscontrmplated that the special personnel-training program will benecessary before the machines can be placed in operation it isestimated that this training program will cost about $700 per newmachine. if the MARR is 9% before taxes, what should the companydo?
A) 6 new machines because they save/ cost $X per year. (findthis amount X)
B)3 new machines and 4 old machines because they save/cost $Xper year. (find this amount X)
C)Collect more information because with the given information,this problem cannot be solved.
