Darcy Roofi ng is faced with a decision. The company relies very heavily on the use of its 60-foot extension lift for work on large homes and commercial properties. Last year, Darcy Roofi ng spent $60,000 refurbishing the lift. It has just determined that another $40,000 of repair work is required. Alternatively, it has found a newer used lift that is for sale for $170,000. The company estimates that both lifts would have useful lives of 6 years. The new lift is more effi cient and thus would reduce operating expenses by about $20,000 per year. Darcy Roofi ng could also rent out the new lift for about $10,000 per year. The old lift is not suitable for rental. The old lift could currently be sold for $25,000 if the new lift is purchased. Prepare an incremental analysis showing whether the company should repair or replace the equipment.
Darcy Roofi ng is faced with a decision. The company relies very heavily on
the use of its 60-foot extension lift for work on large homes and commercial properties.
Last year, Darcy Roofi ng spent $60,000 refurbishing the lift. It has just determined that
another $40,000 of repair work is required. Alternatively, it has found a newer used lift
that is for sale for $170,000. The company estimates that both lifts would have useful lives
of 6 years. The new lift is more effi cient and thus would reduce operating expenses by
about $20,000 per year. Darcy Roofi ng could also rent out the new lift for about $10,000
per year. The old lift is not suitable for rental. The old lift could currently be sold for
$25,000 if the new lift is purchased. Prepare an incremental analysis showing whether the
company should repair or replace the equipment.
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