P22000 equipment was purchased three years ago, is contemplating for replacement against a challenger whose cost is P18000. The existing equipment can be traded, in today at P6000 and will have salvage value of P2000, if kept for another 6 years. The annual operating cost of the old equipment is P7000. The challeneger has an annual operating and maintenance cost of P5500 and its salvage value P3000 at the end of 6 years, i equals 15%. Determine whether or not the equipment should be replaced.
P22000 equipment was purchased three years ago, is contemplating for replacement against a challenger whose cost is P18000. The existing equipment can be traded, in today at P6000 and will have salvage value of P2000, if kept for another 6 years. The annual operating cost of the old equipment is P7000. The challeneger has an annual operating and maintenance cost of P5500 and its salvage value P3000 at the end of 6 years, i equals 15%. Determine whether or not the equipment should be replaced.
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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1. A P22000 equipment was purchased three years ago, is contemplating for replacement against a challenger whose cost is P18000. The existing equipment can be traded, in today at P6000 and will have salvage value of P2000, if kept for another 6 years. The annual operating cost of the old equipment is P7000. The challeneger has an annual operating and maintenance cost of P5500 and its salvage value P3000 at the end of 6 years, i equals 15%. Determine whether or not the equipment should be replaced.
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