Assume that you are using a crane with 5 years of service remaining. The existing crane has a book value of $50,000, a salvage value of $5,000, and O&M first-year cost of $10,000 (O&M cost will increase at $2,000 /year thereafter) A new crane can be purchased for $100,000 with a 10-year service life. O&M costs for the first year are $4,000 with $500/year increase thereafter. The estimated resale value is $40,000 at year 5. Should you buy the new crane with i =10% ?

Assume that you are using a crane with 5 years of service remaining. The existing crane has a book value of $50,000, a salvage value of $5,000, and O&M first-year cost of $10,000 (O&M cost will increase at $2,000 /year thereafter) A new crane can be purchased for $100,000 with a 10-year service life. O&M costs for the first year are $4,000 with $500/year increase thereafter. The estimated resale value is $40,000 at year 5. Should you buy the new crane with i =10% ?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 17EA: Gardner Denver Company is considering the purchase of a new piece of factory equipment that will...

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