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Question 9 A manufacturing company purchased a packing system 4 years ago for $640,000. The company had planned on using the equipment for 7 more
Question 9 A manufacturing company purchased a packing system 4 years ago for $640,000. The company had planned on using the equipment for 7 more years at which time it would have a salvage value of $57,000. Today the salvage value is $135,000 The annual operating costs of the system aren't known. It is known that if the company is to use the existing equipment, a $35,500 upgrade would be required before production can be started. The company is considering replacing the system earlier than originally planned. The new system under consideration will cost $256,200 and has a 11 year economic service life at which time the salvage value would be $17,960. The proposed new system has an expected annual operating cost of $17,000/year. MARR is 20.00% What is the maximum annual operating cost that the existing system can have before it would be more profitable to purchase the proposed new system
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