Answer :
The equivalent uniform annual cost (EUAC) for keeping the old turret lathe is $24,347. The EUAC for replacing the turret lathe is $23,435. Therefore, we should not replace the old turret lathe.
The EUAC for keeping the old turret lathe is calculated by taking the present value of the future cash flows and dividing by the number of years. The future cash flows include the annual maintenance and operating costs, the salvage value of the old lathe, and the cost of keeping the old lathe for an additional 2 years.
The EUAC for replacing the turret lathe is calculated by taking the present value of the future cash flows and dividing by the number of years. The future cash flows include the purchase price of the new lathe, the annual maintenance and operating costs, and the salvage value of the new lathe.
In this case, the EUAC for keeping the old turret lathe is slightly lower than the EUAC for replacing the turret lathe. Therefore, we should not replace the old turret lathe.
To learn more about salvage value click here : brainly.com/question/28387066
#SPJ11