Expected operating expenses

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Reference no: EM131088398

A 5 year old machine has SV = $1,200 if sold today, and $400 if sold 5 years from now. It's operating expenses are $800 per year. A new machine is available for $2400, has expected operating expenses of $500 per year, and a SV = $1,000 at the end of its 5 year economic life. There is also the possibility of overhauling the old machine at a cost of $600, which would increase the salvage value in 5 years by $200 and reduce the operating expenses by $200 per year. If the MARR is 10%, which course of action would you recommend?

Reference no: EM131088398

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