Machine A was purchased last year for $20,000 and had an estimated market value of $2,000 at the end of its 6-year useful life. Annual operating costs are $2,000. The machine will perform satisfactorily over the next 5 years. A salesperson for another company is offering a replacement, machine B , for $14,000 with a market value of $1,400 after 5 years. Annual operating costs for machine B will only be $1,400. A trade-in allowance of $10,400 has been offered for machine A. If the MARR is 12% per year, should you buy the new machine? Use RORAI method. Write a breif interpretation of your answer.
Machine A was purchased last year for $20,000 and had an estimated market value of $2,000 at the end of its 6-year useful life. Annual operating costs are $2,000. The machine will perform satisfactorily over the next 5 years. A salesperson for another company is offering a replacement, machine B , for $14,000 with a market value of $1,400 after 5 years. Annual operating costs for machine B will only be $1,400. A trade-in allowance of $10,400 has been offered for machine A. If the MARR is 12% per year, should you buy the new machine? Use RORAI method. Write a breif interpretation of your answer.
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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Machine A was purchased last year for $20,000 and had an estimated market value of $2,000 at the end of its 6-year useful life. Annual operating costs are $2,000. The machine will perform satisfactorily over the next 5 years. A salesperson for another company is offering a replacement, machine B , for $14,000 with a market value of $1,400 after 5 years. Annual operating costs for machine B will only be $1,400. A trade-in allowance of $10,400 has been offered for machine A. If the MARR is 12% per year, should you buy the new machine? Use RORAI method. Write a breif interpretation of your answer.
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