The Ajax Corporation has an overhead crane that has an estimated remaining life of 8 years. The crane can be sold now for $8,000. If the crane is kept in service, it must be overhauled immediately at a cost of $5,000.Operating and maintenance costs will be $3,000 per year after the crane is overhauled. The overhauled crane will have zeroMVat the end of the 8-year study period. A new crane will cost $20,000, will last for 8 years, and will have a $4,000 MV at that 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?
The Ajax Corporation has an overhead crane that has an estimated remaining life of 8 years. The crane can be sold now for $8,000. If the crane is kept in service, it must be overhauled immediately at a cost of $5,000.Operating and maintenance costs will be $3,000 per year after the crane is overhauled. The overhauled crane will have zeroMVat the end of the 8-year study period. A new crane will cost $20,000, will last for 8 years, and will have a $4,000 MV at that 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?
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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The Ajax Corporation has an
Operating and maintenance costs will be $3,000 per year after the crane is overhauled. The overhauled crane will have zeroMVat the end of the 8-year study period. A new crane will cost $20,000, will last for 8 years, and will have a $4,000 MV at that 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?
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