Convex function of the number of years the equipment

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convex function of the number of years the equipment is used. Under certain conditions, the optimum replacement interval can be determined, i.e., the frequency of replacements that will minimize EUAC.
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Principles of Engineering Economic Analysis , 5th edition Optimum Replacement
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Principles of Engineering Economic Analysis , 5th edition Example 11.18 a) A medium-sized industrial grade compressor can be purchased for $10,000. Its salvage value will be negligible, regardless of how long it is used. Annual O&M costs are expected to increase $1,500/yr, with a 1 st year O&M cost of $2,500. Based on a 15% MARR , how frequently should the compressor be replaced?
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Principles of Engineering Economic Analysis , 5th edition Example 11.18 a) A medium-sized industrial grade compressor can be purchased for $10,000. Its salvage value will be negligible, regardless of how long it is used. Annual O&M costs are expected to increase $1,500/yr, with a 1 st year O&M cost of $2,500. Based on a 15% MARR , how frequently should the compressor be replaced?
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Principles of Engineering Economic Analysis , 5th edition Example 11.18 (Continued) b) Now, suppose annual O&M costs increase $2,500/yr, with a 1 st year O&M cost of $2,500. Based on a 15% MARR , how frequently should the compressor be replaced?
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Principles of Engineering Economic Analysis , 5th edition Example 11.18 (Continued) c) Now, suppose annual O&M costs increase $2,500/yr, with a 1 st year O&M cost of $2,500 and the initial cost of the compressor increases from $10,000 to $20,000. Based on a 15% MARR , how frequently should the compressor be replaced?
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Principles of Engineering Economic Analysis , 5th edition Example 11.18 (Continued) d) Now, suppose annual O&M costs increase $2,500/yr, with a 1 st year O&M cost of $2,500, the initial cost of the compressor is $20,000, and the MARR is decreased to 1.5%. How frequently should the compressor be replaced?
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Principles of Engineering Economic Analysis , 5th edition Example 11.18 (Continued) e) Now, suppose the compressor costs $10,000; annual O&M costs increase 10%/yr, with a 1 st year O&M cost of $2,500; and salvage value is a decreasing geometric series, with a decrease of 20%/yr, i.e., the salvage value after 1-yr of use is $8,000, after 2 yrs use is $6,400, … Using a 15% MARR , how frequently should the compressor be replaced?
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Principles of Engineering Economic Analysis , 5th edition n* = 4 yrs P = $10,000 SV = $0 O&M 1 = $2,500 G = $1,500 MARR = 15%
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Principles of Engineering Economic Analysis , 5th edition Example 11.18 (Continued) b) Now, suppose annual O&M costs increase $2,500/yr, with a 1 st year O&M cost of $2,500. Based on a 15% MARR , how frequently should the compressor be replaced?
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Principles of Engineering Economic Analysis , 5th edition n* = 3 yrs P = $10,000 SV = $0 O&M 1 = $2,500 G = $2,500 MARR = 15%
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Principles of Engineering Economic Analysis , 5th edition Example 11.18 (Continued) c) Now, suppose annual O&M costs increase $2,500/yr, with a 1 st year O&M cost of $2,500 and the initial cost of the compressor increases from $10,000 to $20,000. Based on a 15% MARR , how frequently should the compressor be replaced?
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Principles of Engineering Economic Analysis , 5th edition n* = 5 yrs P = $20,000 SV = $0 O&M 1 = $2,500 G = $2,500 MARR = 15%
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Principles of Engineering Economic Analysis , 5th edition Example 11.18 (Continued) d)
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