D-76 A new chemical remediation tank is needed. C'urrentlechnology tanks, which cost $150,000, musI Iedrained and treated every 2 years at a cost of$30,000; the tanks will last 10 years, and ench willhave a salvage value of 5% of first cost. A tank withnew technology has just come on the market. T'horeare no periodic maintenance costs, and a tank willlast 20 years. If the new tanks cost $325,000, whatminimum salvage value, as a percentage of lirst cont,would be required for this technology to be a betleroption? Use a 12% interest rate.(a) 10%(b) 36%(c) 57%(d) 72%

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minimum salvage value, as a percentage of first conl, would be required for this technology to be a hetter option? Use a 12% interest rate.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Production Budget

A budget can be defined as a financial plan designed by an undertaking for a definite period in the future that can contribute towards enhancing the financial success of the business undertaking. It is used to estimate the revenue and expenses. The budget generally takes into account both current and future income and expenses.

Question

D-76 A new chemical remediation tank is needed. C'urrent
lechnology tanks, which cost $150,000, musI Ie
drained and treated every 2 years at a cost of
$30,000; the tanks will last 10 years, and ench will
have a salvage value of 5% of first cost. A tank with
new technology has just come on the market. T'hore
are no periodic maintenance costs, and a tank will
last 20 years. If the new tanks cost $325,000, what
minimum salvage value, as a percentage of lirst cont,
would be required for this technology to be a betler
option? Use a 12% interest rate.
(a) 10%
(b) 36%
(c) 57%
(d) 72%

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