Q. A manufacturing company is considering the purchase of a new CNC lathe, which will cost $60,000 and has an annual maintenance cost of
$8,000. A few parts in the lathe need to be replaced once every 5 years to enable smooth running of the lathe. This would cost an additional
$20,000 (once every 5 years). Assuming that the lathe would last 15 years under these conditions, what is the total equivalent cost (present value) of this investment at an interest rate of 12%? (Assume that
there will be no appreciable salvage value at the end of 15 years.)
β
Correct Answer: (B)
132275