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Farmer Ned is trying to decide whether he should rebuild the engine on his current combine or whether he should invest in a new combine
Farmer Ned is trying to decide whether he should rebuild the engine on his current combine or whether he should invest in a new combine to harvest crops for the next 12 years. If Ned rebuilds his combine, it will cost $29,000 to do so and will cost $8,100 per year to operate and maintain. At the end of 12 years, the rebuilt combine will have a negligible salvage value. If Ned purchases a new combine, he would trade in his current combine for $80,000. He estimates a new combine would cost $360,000 and would cost $1,500 per year to maintain. At the end of 12 years, this combine would have a trade in value of $168,000. Assume Ned's MARR is 5%. Compute the EUAC for each alternative using the opportunity cost approach. Click here to access the TVM Factor Table Calculator. $ EUAC(rebuild): $ EUAC(buy)
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