Started a business mowing lawns for churches

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Reference no: EM131530999

Four years ago, Errol bought an industrial-grade lawn mower and started a business mowing lawns for churches, parks, and other local greenspaces Because of increasing maintenance costs for the mower, he is considering replacing it with a new machine. The defender was originally purchased for $9, 000 and could be sold now for $6, 000. Maintenance costs for the defender were $500 in year one (four years ago) and have increased by a uniform gradient of $100 per year ever since. In five years, the defender will only have a MV of $1, 000. The challenger could be purchased for $11, 000 and would have a MV of $3, 000 in five years. Maintenance for the challenger would be $150 per year, for all five years. Assume a MARR of 15% and a planning horizon of five years. Report the EUAC of the preferred alternative, rounded to the nearest dollar.

Reference no: EM131530999

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