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contemplating for replacement against a challenger whose cost is P18,000. The existing equipment can be traded in today at P6,000 and will have a salvage value of P2,000, kept for another 6 years,. The challenger has an annual operating and maintenance costs of P5,500 and its salvage value P3,000 at end of year 6, i = 15%. Determine whether or not the old equipment should be replaced.

contemplating for replacement against a challenger whose cost is P18,000. The existing equipment can be traded in today at P6,000 and will have a salvage value of P2,000, kept for another 6 years,. The challenger has an annual operating and maintenance costs of P5,500 and its salvage value P3,000 at end of year 6, i = 15%. Determine whether or not the old equipment should be replaced.

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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A P22,000 equipment was purchased three years ago, is contemplating for replacement against a challenger whose cost is P18,000. The existing equipment can be traded in today at P6,000 and will have a salvage value of P2,000, if kept for another 6 years,. The challenger has an annual operating and maintenance costs of P5,500 and its salvage value P3,000 at end of year 6, i = 15%. Determine whether or not the old equipment should be replaced.
Transcribed Image Text:A P22,000 equipment was purchased three years ago, is contemplating for replacement against a challenger whose cost is P18,000. The existing equipment can be traded in today at P6,000 and will have a salvage value of P2,000, if kept for another 6 years,. The challenger has an annual operating and maintenance costs of P5,500 and its salvage value P3,000 at end of year 6, i = 15%. Determine whether or not the old equipment should be replaced.
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