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Flounder, a large manufacturing company, currently uses a large printing press in its operations and is considering two replacements: the PDX 341 and PDW581. The
Flounder, a large manufacturing company, currently uses a large printing press in its operations and is considering two replacements: the PDX 341 and PDW581. The PDX costs $504,000 and has annual maintenance costs of $10,400 for the first 5 years and $15,400 for the next 10 years. After 15 years, the PDX will be scrapped (salvage value is zero). In contrast, the PDW can be acquired for $126,000 and requires maintenance of $30,800 a year for its 10 -year life. The salvage value of the PDW is expected to be in 10 years. Assuming that Flounder must replace its current printing press (it has stopped functioning), has a(n) 9-percent cost of capital, and all cash flows are after tax, which replacement press is the most appropriate? (Round answers to 2 decimal places, e.g. 125.25.) Chain Replication Approach: Equivalent Annual NPV Approach
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