the Ajax corporation has an overhead crane that has an estimated remaining life
ID: 2804830 • Letter: T
Question
the Ajax corporation has an overhead crane that has an estimated remaining life of 5 years. the crane can be sold now for $5,000. If the crane is kept in service, it must be overhauled immediatley at a cost of $4,000. operating and maintenance costs will be $6,000 per year agter the crane is overhauled. the overhauled crane will have zero MV at the end of the 5-year study period. a new crane will cost $16,000, will last for 5 years, and will have a $4,000 MV at that time. operating and maintenance costs are $3,000 per year for the new crane. the company uses a before-tax interest rate of 10% per year in evaluating investment alternatives. should the company replace the old crane?
DEFENDER AW=? PW=? CHALLENGER AW=? PW?Explanation / Answer
Statement showing EAUC
For Defender
For Challanger
Thus company should replace the old crane
Particulars Defender-to overhaul Cost of overhauling 4000 Capital recovery factor 1/PVIFA(10%,5years)1/3.7908 0.2638 Annual cost of overhauling 1055.2 operating and maintenance costs 6000 Total EAUC 7055.2
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.