AKO Tire Company is evaluating whether it should retain the current melting process that uses a conventional method or replace it with a high-tech method. The relevant information for each method is shown. Use an interest rate of 12% per year. Which one of the following value is closest to the replacement value? Conventional High-Tech |Original cost 6 years ago, ($) -435,000 Investment cost now, ($) -800,000 Current market value, ($) -20,000 Annual operating cost, (S - 170,000 -70,000 Salvage value, (S) Remaining life, (years) 70,000 5 10 Select one: O a. -254,622 O b. -158,031 c. - 135,534 d. – 125,679 e. -212,440

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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Chapter1: Investments: Background And Issues
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AKO Tire Company is evaluating whether it should retain the current melting process that uses a conventional method or
replace it with a high-tech method. The relevant information for each method is shown. Use an interest rate of 12% per
year. Which one of the following value is closest to the replacement value?
Conventional
High-Tech
Original cost 6 years ago, ($)
-435,000
Investment cost now, ($)
-800,000
Current market value, (S)
-20,000
Annual operating cost, (S
- 170,000
-70,000
Salvage value, (S)
Remaining life, (years)
70,000
5
10
Select one:
а. — 254,622
b. – 158,031
c. - 135,534
d. – 125,679
e. -212,440
Transcribed Image Text:AKO Tire Company is evaluating whether it should retain the current melting process that uses a conventional method or replace it with a high-tech method. The relevant information for each method is shown. Use an interest rate of 12% per year. Which one of the following value is closest to the replacement value? Conventional High-Tech Original cost 6 years ago, ($) -435,000 Investment cost now, ($) -800,000 Current market value, (S) -20,000 Annual operating cost, (S - 170,000 -70,000 Salvage value, (S) Remaining life, (years) 70,000 5 10 Select one: а. — 254,622 b. – 158,031 c. - 135,534 d. – 125,679 e. -212,440
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