Question: Five years ago UTTs cafeteria bought an ice-maker with a nominal 10-year life for $1000 and an end-of-life $100 salvage value. The ice-makers current market

Five years ago UTT’s cafeteria bought an ice-maker with a nominal 10-year life for $1000 and an end-of-life $100 salvage value. The ice-maker’s current market value is $300. Historically, its average operating expenses for any year x have been C_x = $100 + $25(x – 1), x = 1 to 5, and UTT expects operating expenses to continue following this trend.

UTT is considering replacing the ice-maker with a more ozone-friendly one for $1,200, also with a 10-year life, and with salvage value dropping by $100 each year from its initial price. Average operating expenses are uniform at $360. UTT applies a 10% MARR to evaluate this replacement decision, and a 5-year analysis. Should they replace the ice-maker now?

Step by Step Solution

★★★★★

3.41 Rating (154 Votes )

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock

For old machine the annual expense is calculated using the given equa... View full answer

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Finance Questions!

What was the important goal of The Federal Deposit Insurance Corp (FDIC), which was an integral part of The Banking Act of 1933?

At 20 C, ozone molecules, O3, have an average velocity of 390 m/s, and oxygen molecules, O2, have an average velocity of 478 m/s. If these gases are at the same temperature, they have the same...

A small coil C with N = 200 turns is mounted on one end of a balance beam and introduced between the poles of an electromagnet as shown in Fig. 3.70. The cross-sectional area of the coil is S = 1.0...

Annual versus cumulative data for replacement decision Because their three adult children have all at last left home, Paul and Cindy Bender recently moved to a smaller house. Paul owns a riding...

Five years ago Hemingway Inc. issued 6,000 30-year bonds with par values of $1,000 at a coupon rate of 8%. The bonds are now selling to yield 5%. The company also has 15,000 shares of preferred stock...

Five years ago, GSI an oil services company headquartered in Texas, issued $10 million worth of 12% 30-year bonds with the dividend payable quarterly. The bonds have a call date of this year if GSI...

Five years ago, your dad bought 250 shares of ABC for $6 each and 300 shares of DEF for $7.50 each. He has now given you all his shares, when both stocks are trading at $8. What are the weights of...

Twenty-five years ago, the U.S. government issued thirty-year bonds with a coupon rate of about 8%. Five years ago, the U.S. government sold ten-year bonds with a coupon rate of about 5%. Suppose...

Five years ago, an alumnus of a university donated $50,000 to establish a permanent endowment for scholarships. The first scholarships were awarded 1 year after the contribution. If the amount...

Hamilton House is a charming country home, situated on a small piece of land, several kilometres from a nearby city. It was built about a century ago. Until quite recently, it sat next to empty crop...

Helen Morgan, CFA, has been asked by Carroll to determine the potential valuation for Sundanci using the dividend discount model. Morgan anticipates that Sundanci's earnings and dividends will grow...

A rent-to-own (RTO) agreement appeals to low-income and financially distressed consumers. It allows immediate access to merchandise, and by making all payments, the consumer acquires the merchandise....

Question 1 3 ( 1 point ) Saved Find the slope of the tangent to the curve y = x x 1 l n x at the point ( 1 , 1 ) . 1 0 - 1 1 2

1) How would you define International Human Resource Management (IHRM)? How does IHRM differ from domestic HRM? 2) Why is a greater degree of involvement in employees' personal lives inevitable in...

ABC Corporation purchased a building worth 200,000 on January 1, 20X8. The building has a useful life of 20 years and the company uses straight line depreciation. Assume on December 31, 20x10 the...

When preparing the 2015 schedule, you do not know about any changes that come about in 2016 (i.e., prepare the 2015 schedule with 2015 information only). Given the following information for Company Z...

Dipole moment of -X is 1.6D. What is the dipole moment of the following compound:

Suppose there are two individuals, Bob and Linda, who have demand curves for good X characterized by the equation P= 6-2QandP= 6-Q. Assume that the good is produced competitively, and that the...

The BLA pathway for biologics is less stringent than the NDA pathway for human drugs. Group of answer choices True False

Congratulations, you were hired as a financial analyst for United Cruises following your studies at the University of Technology Sydney. United Cruises is a cruise ship service provider in the...

Aidy Segura was just hired by Chicago Powerboat, Inc. (Powerboat) to help out with the companys financial planning and to evaluate the companys performance. Aidy graduated from NEIU about five years...

Terry Hutchison worked as a self-employed lawyer until two years ago when he retired. He used the cash method of accounting in his business for tax purposes. Five years ago, Terry represented his...

=+6" (Examination level) The current share price of Blueberry ple is 205p. It recently reported earnings per share of 14p and has a policy of paying out 50 per cent of earn- ings in dividends each...

Bryce, a bank official, is married and files a joint return. During 2013 he engages in the following activities and transactions: a. Being an avid fisherman, Bryce develops an expertise in tying...

Jim Macklin is chief executive officer of Red Cliff Machinery, Inc. The company adopted a JIT operating environment five years ago. Since then, each segment of the company has been converted, and a...