Piece of equipment that was purchased

Assignment Help Business Economics

Reference no: EM131166429

A piece of equipment that was purchased for $25,000 five years ago has a current book value of $6,000. This equipment can currently be sold for $ 5,000. This equipment can provide service for another two years with an operating and maintenance cost of $10,000 per year and it can be sold for $500 at the end of two years from now. Since the study period is 5 years, it is proposed that if the old machine is kept now, the work will be outsourced for the last three years at a cost of $15,000 per year paid at the beginning of each of the last three years. A new piece of equipment is available in the market for $40,000. The annual operating and maintenance cost is expected to be only $4,000 per year. The salvage value at the end of the study period of 5 years is expected to be $5,000. If the before-tax MARR is 10% per year compounded yearly, which option should the company select?

Reference no: EM131166429

Questions Cloud

Fixed salary was causing her top manager to shirk on the job : Recently, the owner of a Trader Joe’s franchise decided to change how she compensated her top manager. Last year, she paid him a fixed salary of $60,000 and her store made $130,000 in profits (not counting payment to her top manager). She suspected t..

Long-term relationship with family farms : HomeGrown is a small restaurant that specializes in serving local fruits, vegetables and meats. The company has chosen to enter into a long-term relationship with Family Farms, a local farming operation. The two parties have decided to enter into a l..

Should the imaging system be purchased or leased : Fidelity Life Insurance has a document imaging system that needs replacement. A local salesperson quoted a cost of $10, 000 with an estimated salvage of $900 after 5 or more years. If the system is expected to save $1700 per year in clerical time, fi..

Determine the best time to replace the machine : A special purpose machine can be purchased for $90,000. The operating & maintenance expenses for each of the next five years and the market value at the end of each of the next five years are shown below. If the MARR is 15% per year compounded yearly..

Piece of equipment that was purchased : A piece of equipment that was purchased for $25,000 five years ago has a current book value of $6,000. This equipment can currently be sold for $ 5,000. The salvage value at the end of the study period of 5 years is expected to be $5,000. If the befo..

Type of machine would be needed indefinitely : A machine was purchased five years ago at a cost of $60,000. It currently has a market value of $10,000. The current book value is $15,000. It can function for another 2 years and will have an annual operating expense of $10,000 next year and $12,000..

Why do oligopolistic markets tend to exhibit price stability : What programs are dealing effectively with this population? Why do oligopolistic markets tend to exhibit price stability, and if this is the case, how do firms in these markets compete (illustrating with a couple of real-life examples)?

What programs are dealing effectively with this population : People with disabilities face discrimination and barriers that restrict them from participating in society on an equal basis with others every day. Some of the barriers are that people in wheelchairs can't go anywhere by themselves, someone needs to ..

Assume that the demand curve is downward sloping : Suppose the price and quantity equilibrium is below the price and quantity which maximizes total revenue, what strategy would you use for the firm. Assume that the demand curve is downward sloping.

User Account

All Pages