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Equipment A was purchased four years ago at an original cost of 12,000. It has 3 more years before it can be scrapped at an
Equipment A was purchased four years ago at an original cost of 12,000. It has 3 more years before it can be scrapped at an estimated salvage value of 4,000. It can now be sold at 6,000. Its annual operation cost is 3,000 and 1,200 for maintenance. It is proposed to replace this with equipment B whose first cost is 18,000 having a useful life of 9years and a salvage value of 6,000. Operating cost is 800 and for maintenance is 2,400 per year. Yield on investment is to be at least 6%. Should equipment A be replaced? By how much is the difference between the annual cost Equipment A and Equipment B? Select one: a.Equipment A must not be replaced by Equipment B. The annual cost of Equipment A is P136.05 greater than Equipment B. b.Equipment A must not be replaced by Equipment B. The annual cost of Equipment A is P136.05 less than Equipment B. c.Equipment A must not be replaced by Equipment B. The annual cost of Equipment A is equal Equipment B. d.Equipment A must be replaced by Equipment B. The annual cost difference of Equipment A is P136.05 greater than Equipment B
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