An industrial forklift has been in service for several years and management plans to replace it. For the respective study, a planning horizon of five years will be used. The old forklift (defender) has a current market value of $1,500. If the defender were to be retained, it is anticipated that it would generate annual O&M costs of $7,300. It would have a market value of zero at the end of five additional years of service. The new forklift (challenger) will cost $10,000 and will have operating and maintenance costs totaling $5,100. At the end of the planning horizon it will have a market value of $2,500. Determine the preferable alternative by comparing the present value and the minimum acceptable rate of return (before taxes) of 20% per year.
An industrial forklift has been in service for several years and management plans to replace it. For the respective study, a planning horizon of five years will be used. The old forklift (defender) has a current market value of $1,500. If the defender were to be retained, it is anticipated that it would generate annual O&M costs of $7,300. It would have a market value of zero at the end of five additional years of service. The new forklift (challenger) will cost $10,000 and will have operating and maintenance costs totaling $5,100. At the end of the planning horizon it will have a market value of $2,500. Determine the preferable alternative by comparing the present value and the minimum acceptable
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