Question
We buy a second-hand crane now for $500,000. The residual value after ten years is estimated to be $80,000. (a) It is estimated that the
We buy a second-hand crane now for $500,000. The residual value after ten years is estimated to be $80,000. (a) It is estimated that the annual benefit from this crane will be $60,000 within ten years. Can the annual return exceed 4% (calculated with compound interest)? (b) Continuing from the above question, if the maintenance and operation cost of the crane is $10,000 in the first year and increases by $5,000 every year starting from the second year, use the annuity analysis method to determine whether the return on this investment is positive or negative (assuming the annual rate of return is 4%).
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