A company purchased a new quality inspection system for $750,000. The estimated salvage value was $150,000 after 10 years. Currently the edpected remaining life is 5 years wuth an AOC of $30,000 per year and an esrimated salvage valye of $100,000. The new president has reccomended early replacement of the system with one that costs $400,000 and has a 12 year economic service life, a $35,000 service value, and an wstimated AOC of $50,000 per tear. The MARR for tge corporation is 12% per year. Find tge Current value, Pd, of the defender that makes the challenger competitive with the defender.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
A company purchased a new quality inspection system for $750,000. The estimated salvage value was $150,000 after 10 years. Currently the edpected remaining life is 5 years wuth an AOC of $30,000 per year and an esrimated salvage valye of $100,000. The new president has reccomended early replacement of the system with one that costs $400,000 and has a 12 year economic service life, a $35,000 service value, and an wstimated AOC of $50,000 per tear. The MARR for tge corporation is 12% per year. Find tge Current value, Pd, of the defender that makes the challenger competitive with the defender.
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