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Engineering economics EmKay Logistics is considering replacing one of its existing material handling systems and either purchasing or leasing a new system. The existing system
Engineering economics EmKay Logistics is considering replacing one of its existing material handling systems and either purchasing or leasing a new system. The existing system has an annual O&M costs of $20,000, a remaining life of 8 years, and an estimated salvage value of $2,500 at that time. A new system will cost $60,000, have an annual O&M costs of $9,000, and will have a market value of $6,000 in 8 years. If the new system is purchased, the existing system will be traded in for $10,000. Leasing a new system will cost $13,000 per year, payable at the beginning of the year, plus operating costs of $4,500 per year, payable at the end of the year. If the new system is leased, the existing system will be sold for $5,000. Compute the annual costs of keeping the existing system, purchasing a new system, and leasing a new system based on a planning horizon of 8 years. MARR is 10% per year compounded annually. Based on an annual cost comparison, what is your recommendation
Engineering economics
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