A mining company has invested in the purchase of a new machine costing $100,000 and it plans to use it for five years. In the first year of use, the operation & maintenance costs will be $20,000 and then will increase by $2,500 per year. The salvage value of the machine at the end of its service is estimated to be $20,000. The company’s MARR is 9%.
A) Determine the annual capital cost (ownership cost) for the machine.
B) What is the annual equivalent cost of owning & operating the machine?