A firm is planning to replace a machine. It was put into service 4 years ago. It costed $26000. The current salvage value is $13000, and it will reduce to $10,000, $8125, $7000, and $6250 yearly. The operating cost is $3000 and increase by $1000 yearly. The interest rate is 10%. And, an alternative equipment will have $7100 uniform annual cost. Determine when to replace this machine is better?
A firm is planning to replace a machine. It was put into service 4 years ago. It costed $26000. The current salvage value is $13000, and it will reduce to $10,000, $8125, $7000, and $6250 yearly. The operating cost is $3000 and increase by $1000 yearly. The interest rate is 10%. And, an alternative equipment will have $7100 uniform annual cost. Determine when to replace this machine is better?
Fundamentals Of Financial Management, Concise Edition (mindtap Course List)
10th Edition
ISBN:9781337902571
Author:Eugene F. Brigham, Joel F. Houston
Publisher:Eugene F. Brigham, Joel F. Houston
Chapter12: Cash Flow Estimation And Risk Analysis
Section: Chapter Questions
Problem 10P: Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6...
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