A company is currently producing chemical compounds by a process installed 10 years ago at a cost of $100,000. It was assumed that the process would have a 20-year life with a zero salvage value. The current market value of the equipment, however, is $60,000, and the initial estimate of its economic life is still good. The annual operating costs associated with this process are $18,000. A sales representative from U.S. Instrument Company is trying to sell a new chemical compound-making process to the company. This new process will cost $200,000 have a service life of IO years with a salvage value of $20,000, and reduce annual operating costs to $4,000. Assuming the company desires a return of 12% on all investments, should it invest in the new process?
A company is currently producing chemical compounds by a process installed 10 years ago at a cost of $100,000. It was assumed that the process would have a 20-year life with a zero salvage value. The current market value of the equipment, however, is $60,000, and the initial estimate of its economic life is still good. The annual operating costs associated with this process are $18,000. A sales representative from U.S. Instrument Company is trying to sell a new chemical compound-making process to the company. This new
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