Question
After 8 years of use, the heavy-truck engine-overhaul equipment at Petes Truck Repair was evaluated for replacement. Petes accountant used an after-tax minimum acceptable rate
After 8 years of use, the heavy-truck engine-overhaul equipment at Petes Truck Repair was evaluated for replacement. Petes accountant used an after-tax minimum acceptable rate of return (MARR) of 8% per year, Te of 32%, and a current market value of $25,000 to determine AW = $2100. The new equipment costs $80,000, uses straight line (SL) depreciation over a 10-year recovery period, and has a $7,000 salvage estimate. The estimated cash flow before taxes (CFBT) is $7,000 per year. Pete asked his engineer son Ramon to determine if the new equipment should replace what is owned currently. From the accountant, Ramon learned the current equipment cost $26,000 when purchased and reached a zero book value several years ago. Help Ramon answer his fathers question.
The annual worth of the challenger is determined to be $ .
The (Click to select) challenger defender has a higher AW value and thus selected.
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