Breakeven Analysis

Flo's Frozen Yogurt shop is evaluating new dispensing machines.

The Flownator has a first cost of $30473 and annual expenses of $9126 that will increase by $553 per year. It will require an overhaul at the end of year 4 at a cost of $5207. The Flownator will save $19007 per year in labor costs. The Flownator has a salvage value of $9575 and a lifespan of 12 years.

The YogGoo300 has a first cost of $23190 and annual expenses of $3648 that will increase by 1% per year. The YogGoo300 will save Flo's $10791 per year in labor costs. The YogGoo300 has a lifespan of 5 years.

What must the salvage value of the YogGoo30 be to make it equally desirable to the Flownator? Use a MARR of 1% to make your calculation.

Enter your answer as follows: 12345