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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 8 years. If Ned rebuilds his combine, it will cost $41,000 to do so and will cost $7.900 per year to operate and maintain. At the end of 8 years, the rebuilt combine will have a negligible salvage value. If Ned purchases a new combine, he would trade in his current combine for $92,000. He estimates a new combine would cost $280,000 and would cost $1.450 per year to maintain. At the end of 8 years, this combine would have a trade in value of $167.000. Assume Ned's MARR is 6%. Compute the EUAC for each alternative using the opportunity cost approach. Click here to access the TVM Factor Table Calculator. $ EUAC(rebuild): $ EUAC(buy): Carry all interim calculations to 5 decimal places and then round your final answers to a whole number. The tolerance is +5. Which alternative would you recommend for Farmer Ned? Rebuild the engine on his current combine Trade in his current combine for a new combine Either alternative is fine
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