Lichty car wash has some equipment that needs to be rebuilt

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Reference no: EM13576677

Lichty Car Wash has some equipment that needs to be rebuilt or replaced. The following information has been gathered concerning this decision: Present Equipment New Equipment Purchase cost new $52,000 $49,000 Remaining book value $20,400 Cost to rebuild now $20,400 Major maintenance at the end of 3 years $5,200 $3,200 Annual cash operating costs $10,000 $7,600 Salvage value in 6 years $2,400 $7,200 Salvage value now $9,600 Lichty uses the total-cost approach and a discount rate of 9% in making capital budgeting decisions. Regardless of which option is chosen, rebuild or replace, at the end of six years Mr. Lichty plans to close the car wash and retire. If the new equipment is purchased, the present value of the annual cash operating costs associated with this alternative is: (Round your 'PV factors' to three decimal places. Round your other intermediate calculations and final answer to the nearest whole dollar.)

Reference no: EM13576677

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