With the estimates shown below, Sarah needs to determine the trade-in (replacement) value of machine X that will render its AW equal to that of machine Y at an interest rate of 8% per year. Determine...

With the estimates shown below, Sarah needs to

determine the trade-in (replacement) value of machine

X that will render its AW equal to that of

machine Y at an interest rate of 8% per year. Determine

the RV (a) by hand solution, and (b) using a

spreadsheet.

Machine X Machine Y

Market value, $ ? 80,000

Annual cost, $ per year −60,000 −40,000 year 1,

increasing by 2000

per year thereafter

Salvage value, $ 15,000 20,000

Life, years 3 5