Wood and company ltd is considering the purchase of a new equipment to perform operations currently being performed on a less efficient equipment .the purchase price is $75,000 and includes cost of delivery and installation. the company's production engineer estimates that the new equipment will produce savings of $90,000 in labor and other direct cost annually as compared with the present equipment . he estimates the prosed equipment's economic life at 10 years with zero savings due . the present equipment is in good working condition and will last physically for at least 20 more years . the company can borrow money at 20 percent, although it does not plan to negotiate a loan specifically for the purchase of this equipment. the company regains a return of at least 28 percent before taxes or an investment of this type,taxes are to be disregarded.

required:

1. assuming the present equipment has a zero book value and zero salvage value, should the company buy the proposed equipment?

2. assuming the present equipment has a book value of $70,000 and salvage value of $45,000 and that retained for 10 more years it salvage value will be zero should the company buy the proposed.

3. assuming the new equipment will save $20,000, nine years but that its economic life is expected to be 20 years, if other conditions are as stated in (1) above , should the company buy the proposed equipment?

4. discuss any other assumptions that may influence your decision to buy or not to buy the equipment