Question
Bob the Builder is deciding whether to replace an old construction crane with a new one. Bobs old crane originally cost $300,000 and has $270,000
Bob the Builder is deciding whether to replace an old construction crane with a new one. Bobs old crane originally cost $300,000 and has $270,000 of accumulated depreciation. If Bob keeps the old crane, operating costs will be $84,000 per year for its remaining useful life of 8 years. If Bob replaces the old crane, he has an equipment broker who can sell it for $40,000 less an 8% brokerage commission. A new construction crane will cost $296,000 and have a useful life of 8 years. Annual operating costs for the new crane will be $52,000. Prepare a differential analysis that shows whether Bob should keep the old crane or replace it with the new crane.
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