Should chatham automotive replace the forklifts now

Assignment Help Mechanical Engineering

Reference no: EM131356332

Suppose that Chatham Automotive (Problem 7.26) can get a $14 000 trade-in value for their current electric model when they purchase a new propane model. $hould they replace the electric forklifts now?

Problem 7.26:

Chatham Automotive purchased new electric forklifts to move steel automobile parts two years ago. These cost $75 000 each, including the charging stand. In practice, it was found that they did not hold a charge as long as claimed by the manufacturer, so operating costs are very high. This also results in their currently having a salvage value of about $10 000.

Chatham is considering replacing them with propane models. The new ones cost $58 000. After one year, they have a salvage value of $40 000, and thereafter decline in value at a declining-balance depreciation rate of 20%, as does the electric model from this time on. The ALARR is 8%. Operating costs for the electric model are S20 000 over the first year, rising by 12% per year. Operating costs for the propane model initially will be $10 000 over the first year, rising by 12% per year. Should Chatham Automotive replace the forklifts now?

Reference no: EM131356332

Questions Cloud

How often should the pump be replaced : A long-standing principle of computer innovations is that computers double in power for the same price, or, equivalently, halve in cost for the same power, even- 18 months.

Intermediary guarantees an option writer performance : What intermediary guarantees an option writer’s performance? Suppose you hold a call option. The stock price has recently been increasing-making your call option more valuable. Through what process might you take advantage of the liquid nature of the..

Provide a two to three sentence description of control plan : provide a two- to three-sentence description of the control plan that you believe would best address that deficiency.

Company uses cumulative voting procedures : The shareholders of Motive Power Corp. need to elect three new directors to the board. There are 14,400,000 shares of common stock outstanding, and the current share price is $10.85. If the company uses cumulative voting procedures, how much will it ..

Should chatham automotive replace the forklifts now : Chatham Automotive purchased new electric forklifts to move steel automobile parts two years ago. These cost $75 000 each, including the charging stand. In practice, it was found that they did not hold a charge as long as claimed by the manufactur..

Create an information technology project plan in word : Create an Information Technology (IT) project plan in Microsoft Word of 2,100 words, including an introduction and conclusion, and include the project proposal summary that you created in Part 1

What is the value at risk : A 4-year note with annual coupon payments has a face value of $1,000 and duration of 3.65. It sells for $1012.45 and yields 5.21%. The average monthly change In the yield Is 0 basis points and the standard deviation of such changes is 23 basis points..

Terminology-receipt of cash dividends : (Terminology) Define each of the following dates and place them in their proper order with respect to the payment and receipt of cash dividends: date of record, ex-dividend date, declaration date, and payment date.

Which portfolio is undervalued : Consider two portfolios in a single factor world. Portfolio A has a beta of 0.1 and an expected return of 13%. Portfolio B has a beta of 0.4 and an expected return of 15%. The risk-free rate is 10%. Which portfolio is undervalued?

User Account

All Pages