What is the equivalent cost of the new meter

Reference no: EM13296556

You are considering whether to replace an existing flow meter. The existing meter can be sold now for $50 or it can be sold in 1 year for $10. It costs $30 per year to operate and maintain. A new meter costs $400 and has a 10-year life. It could be sold for $40 at the end of its life. The new meter costs $14 per year to operate and maintain. If the cost of capital is 12% then:

What is the cost of keeping the old meter 1 more year?
What is the equivalent cost of the new meter?
Do you recommend buying the new meter now? Why?

Reference no: EM13296556

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