Georgia Ceramic Company has an automatic glaze sprayer that has been used for the past 10 years. The sprayer can be used for another 10 years and will have a zero salvage value at that time. The annual operating and maintenance costs for the sprayer amount to $15,000 per year. Due to an increase in business, a new sprayer must be purchased, either in addition to or as a replacement for the old sprayer. Option 1: H the old sprayer is retained, a new, smaller capacity sprayer willbe purchased at a cost of $48,000; this new sprayer will have a $5.000 salvage value in I 0 years and annual operating and maintenance costs of $12.000. The old sprayer has a current market value of $6.000.Option 2: If the old sprayer is sold, a new sprayer of larger capacity will bepurchased for $84,000. This sprayer will have a $9,000 salvage value in 10years and annual operating and maintenance costs of $24,000.Which option should be selected at MARR = 12%?
Georgia Ceramic Company has an automatic glaze sprayer that has been used for the past 10 years. The sprayer can be used for another 10 years and will have a zero salvage value at that time. The annual operating and maintenance costs for the sprayer amount to $15,000 per year. Due to an increase in business, a new sprayer must be purchased, either in addition to or as a replacement for the old sprayer.
Option 1: H the old sprayer is retained, a new, smaller capacity sprayer will
be purchased at a cost of $48,000; this new sprayer will have a $5.000 salvage value in I 0 years and annual operating and maintenance costs of $12.000. The old sprayer has a current market value of $6.000.
Option 2: If the old sprayer is sold, a new sprayer of larger capacity will be
purchased for $84,000. This sprayer will have a $9,000 salvage value in 10
years and annual operating and maintenance costs of $24,000.
Which option should be selected at MARR = 12%?
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