PRIN.OF CORPORATE FINANCE
PRIN.OF CORPORATE FINANCE
13th Edition
ISBN: 9781260013900
Author: BREALEY
Publisher: RENT MCG
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Chapter 6, Problem 34PS

Replacement decisions. A forklift will last for only two more years. It costs $5,000 a year to maintain. For $20,000 you can buy a new forklift that can last for 10 years and should require maintenance costs of only $2,000 a year.

  1. a. If the discount rate is 4% per year, should you replace the forklift?
  2. b. What if the discount rate is 12% per year?
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PRIN.OF CORPORATE FINANCE

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