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A new tire balancing machine is available to replace an existing one. The new one will cost $12,000. The old one initially cost $7000, purchased
- A new tire balancing machine is available to replace an existing one. The new one will cost $12,000. The old one initially cost $7000, purchased 3 years ago, currently can be sold for $2000. If the old machine could be kept for another 3 years, it could be sold for $500. Four years later the new machine can be sold for $3000. The new machine requires inventory of spare parts worth $500. Revenue increase from the new machine would be $25000 ( $95,000 from $70000) while increase in cost will be $6000. Assume a tax rate of 40% and a discount rate of 12%. Should the new machine be purchased?
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