24. Griffin Dewatering purchases a wellpoint pump connected to a skid-mounted diesel engine for $14,000. Its market value for salvage purposes decrease by 30 percent each year. When installed on a construction job, a wellpoint system operates virtually 24/7, and operating and maintenance costs will be $3,500 the first year, increasing by $600 each year thereafter. What is the optimum replacement interval if MARR

The optimum replacement interval can be determined by calculating the equivalent annual cost and using the computed value to divide the asset's price.

The equivalent annual cost (EAC) can be computed using an online finance calculator as follows.

The selection of project alternatives is based on their ability to achieve the expected return or the MARR.

Data and Calculations:

Market value of engine = $14,000

Salvage value depreciation rate = 30%

Operating and maintenance costs for the first year = $3,500

Increase in operating and maintenance costs after the first year = $600

Equivalent Annual Cost = EAC = (AP * DR)/(1-(1+DR)-n)

= $5,683.62

from an online financial calculator.

Asset Price = ($)14000

Required Return Rate (%) = 15

Number of Periods (Lifespan in years) = 3.3 years (100%/30%)

Optimum replacement interval = 2.5 years ($14,000/$5,683.62)

Thus, the optimum replacement interval, which minimizes the total costs of owning and operating the asset, is 2.5 years.

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