Firm owns pressure vessel that it is contemplating replacing

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A firm owns a pressure vessel that it is contemplating replacing. The old pressure vessel has annual operating and maintenance expenses of $60,000 per year and it can be kept for five more years, at which time it will have zero MV. It is believed that $30,000 could be obtained for the old pressure vessel if it were sold now.

A new pressure vessel can be purchased for $120,000. The new pressure vessel will have an MV of $50,000 in five years and will have annual operating and maintenance expenses of $30,000 per year. Using a before-tax MARR of 20% per year, determine whether or not the old pressure vessel should be replaced. A study period of five years is appropriate.

Reference no: EM131376358

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