Hannifin CNG Fuel Dispensers needs to purchase replacement equipment to streamline one of its production lines for

Question:

Hannifin CNG Fuel Dispensers needs to purchase replacement equipment to streamline one of its production lines for a new contract, but may sell the equipment before its expected life is reached at an estimated market value for used equipment. At = 15% per year, select the better option using a future worth analysis over

(a) The expected usage period,

(b) The maximum life, when the salvage values are expected to be 50% of the market values for used equipment. Are the selections the same for both plans?

Option First cost, $ AOC, $ per year Expected market value, $ Expected use, years Maximum life, years D -62,000 -77,000

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... MARR
Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...

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