A company overhead working crane that has an estimated remaining life of 10 years. The old crane is worth $8,000. If the crane is kept in service, it must be overhauled immediately at an extra cost of $4.000. Operating and maintenance costs will be $3,000 per year after the crane is overhauled. The overhauled crane will have zero market value at the end of the 10-year study period. A new crane will cost $18,000, will last for 10 years, and will have a $4,000 market value at the time. Operating and maintenance costs are $1,000 per year for the new crane. The company uses a before-tax interest rate of 10% per year in evaluating investment alternatives. Should the company replace the old crane, and what are the Annual Worth's (AW) of both old and new cranes? (more than one answer) a. Old Crane (Defender) AW=-$4,952.94 b. New Crane (Challenger) AW= -$3,678.44 c. Replace the old crane with new d. New Crane (Challenger) AW=-$4,998.58 □e. Old Crane (Defender) AW=-$5,652.65 O f. Keep the old crane

A company overhead working crane that has an estimated remaining life of 10 years. The old crane is worth $8,000. If the crane is kept in service, it must be overhauled immediately at an extra cost of $4.000. Operating and maintenance costs will be $3,000 per year after the crane is overhauled. The overhauled crane will have zero market value at the end of the 10-year study period. A new crane will cost $18,000, will last for 10 years, and will have a $4,000 market value at the time. Operating and maintenance costs are $1,000 per year for the new crane. The company uses a before-tax interest rate of 10% per year in evaluating investment alternatives. Should the company replace the old crane, and what are the Annual Worth's (AW) of both old and new cranes? (more than one answer) a. Old Crane (Defender) AW=-$4,952.94 b. New Crane (Challenger) AW= -$3,678.44 c. Replace the old crane with new d. New Crane (Challenger) AW=-$4,998.58 □e. Old Crane (Defender) AW=-$5,652.65 O f. Keep the old crane

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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