An equipment alternative is being economically evaluated separately by three engineers at Raytheon. The first cost will

Question:

An equipment alternative is being economically evaluated separately by three engineers at Raytheon. The first cost will be $77,000, and the life is estimated at 6 years with a salvage value of $10,000. The engineers disagree, however, on the estimated revenue the equipment will generate. Joe has made an estimate of $10,000 per year. Jane states that this is too low and estimates $14,000, while Carlos estimates $18,000 per year. If the before-tax MARR is 8% per year, use PW to determine if these different estimates will change the decision to purchase the equipment.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important... MARR
Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...