Company can afford to spend for the new compressor

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Reference no: EM131357760

A local meat packaging facility is considering two proposals for improving its refrigeration compartment. Proposal A would involve re-conditioning the compressor and patching the deteriorated insulation for a cost of $6,000. The life of refurbishing the compartment in this way is expected to last 4 years with an annual maintenance cost of $1,200. Proposal B would involve replacing the compressor with a new one and completely replacing all the insulation. The new items would be expected to last for 16 years and the maintenance would be reducced to $600 every two years. The company's MARR is 12%. Determine the amount that the company can afford to spend for the new compressor and insulation so that the project can break even. Draw cash flow diagrams for both options. (TIPS: Write the Equivalent Uniform Annual Worth Equations for the two proposals and equate them together to solve for the Brewakevem Value for the New Compressor.)

Reference no: EM131357760

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