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Reliable Laundromat must either make extensive repairs to its current dry-cleaning system or replace it with a new system. The following information compares the alternatives:

Reliable Laundromat must either make extensive repairs to its current dry-cleaning system or
replace it with a new system. The following information compares the alternatives:
Current New
System System
Purchase cost $ 40,000 $ 60,000
Repair cost $ 17,000
Annual cash operating cost $ 35,000 $ 20,000
Can be sold for today $ 8,000 $ 40,000
Can be sold for in 1 year $ 2,500 $ 10,000
If Reliable keeps the current system, the repairs have to be make immediately. The repairs
Will cause the company to be shut down for 4 days. If the new system is purchased, Reliable
will be shut down for 2 days for the changeover. Average daily profit for Reliable is $1,200.
The owner of Reliable plans to sell the business at the end of one year for $84,000.
If Reliable replaces the system, it will be $_____________________ better or worse off

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