Answered step by step
Verified Expert Solution
Link Copied!

Question

00
1 Approved Answer

A company first purchased a CNC machine for $100K and has used it for 3 years. Its economic life then was estimated at 6 years

A company first purchased a CNC machine for $100K and has used it for 3 years. Its economic life then was estimated at 6 years with a residual value of $10K. Another vendor has offered a replacement that will have lower O&M and last 10 years. The new vendor has offered to buy your present CNC machine for $50K(it shown in the companys books as having a depreciated book value of $60K). His price for the new machine is $120K. Your O&M cost for your current machine is $5K/year. The claims his CNC machine will only cost$3K/year and can be sold at the end of 10 years for $10K. Should you replace your current machine? MARR is 10%.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions