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Five years ago, a company in New Jersey installed a diesel-electric unit costing $50,000 at a remote site because no dependable electric power was available
Five years ago, a company in New Jersey installed a diesel-electric unit costing $50,000 at a remote site because no dependable electric power was available from a public utility. The company has computed depreciation by the straight-ine method with a useful life of 10 years and a zero salvage value. Annual operation and maintenance expenses are $16,000, and property taxes and insurance cost another $3, 300 per year. Dependable electric service is now available at an estimated annual cost of $25,000. The company in New Jersey wishes to know whether it would be more economical to dispose of the diesel-electric unit now, when it can be sold for $38,000, or to wait five years when the unit would have to be replaced anyway (with no MV). The company has an effective income tax rate of 50% and tries to limit its capital expenditures to opportunities that will earn at least 12% per year after income taxes. What would you recommend? Click the icon to view the interest and annuity table for discrete compounding when MARRE = 12% per year. The AW value for the defender is $ ___. (Round to the nearest dollar.)
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