A company overhead working crane that has an estimated remaining life of 10 years. The old crane is worth $8,000. If the crane is kept in service, it must be overhauled immediately at an extra cost of $4.000. Operating and maintenance costs will be $3,000 per year after the crane is overhauled. The overhauled crane will have zero market value at the end of the 10-year study period. A new crane will cost $18,000, will last for 10 years, and will have a $4,000 market value at the time. Operating and maintenance costs are $1,000 per year for the new crane. The company uses a before-tax interest rate of 10% per year in evaluating investment alternatives. Should the company replace the old crane, and what are the Annual Worth's (AW) of both old and new cranes? (more than one answer) a. Old Crane (Defender) AW=-$4,952.94 b. New Crane (Challenger) AW= -$3,678.44 c. Replace the old crane with new d. New Crane (Challenger) AW=-$4,998.58 □e. Old Crane (Defender) AW=-$5,652.65 O f. Keep the old crane

A company overhead working crane that has an estimated remaining life of 10 years. The old crane is worth $8,000. If the crane is kept in service, it must be overhauled immediately at an extra cost of $4.000. Operating and maintenance costs will be $3,000 per year after the crane is overhauled. The overhauled crane will have zero market value at the end of the 10-year study period. A new crane will cost $18,000, will last for 10 years, and will have a $4,000 market value at the time. Operating and maintenance costs are $1,000 per year for the new crane. The company uses a before-tax interest rate of 10% per year in evaluating investment alternatives. Should the company replace the old crane, and what are the Annual Worth's (AW) of both old and new cranes? (more than one answer) a. Old Crane (Defender) AW=-$4,952.94 b. New Crane (Challenger) AW= -$3,678.44 c. Replace the old crane with new d. New Crane (Challenger) AW=-$4,998.58 □e. Old Crane (Defender) AW=-$5,652.65 O f. Keep the old crane

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 4E

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Similar questions

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