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An industrial lift truck has been in service for several years and management is contemplating to replace it. Two replacement candidates, A and B are

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An industrial lift truck has been in service for several years and management is contemplating to replace it. Two replacement candidates, A and B are under consideration. If new truck A is purchased, the old lift truck has an actual market value of $3,000,if new truck B is purchased, the old lift truck will have an actual market value of $2,500 A planning horizon of 5 years is to be used. If the defender is retained, it is anticipated to have annual operating and maintenance cost of $6,500; it will have a zero market value at the end of 5 additional years of service. Challenger A will cost $14,000 and will have operation and maintenance cost of $3,800; at the end of planning horizon it will have a market value of 3,500 Challenger B will cost $12,000 and will have operating and maintenance cost of $4,800, at the end of the planning horizon will have a market value of 2,000. Determine the preferred alternative with the cash flow approach using i-15% 2

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