Eight years ago, a lathe was purchased for $45,000. Its operating expenses were $8,700 per year. An

Question:

Eight years ago, a lathe was purchased for $45,000. Its operating expenses were $8,700 per year. An equipment vendor offers a new machine for $53,500. An allowance of $8,500 would be made for the old machine when the new one is purchased. The old machine is expected to be scrapped at the end of five years. The new machine's economic service life is five years with a of $12,000. The new machine's O&M cost is estimated to be $4,200 for the first year, increasing at an annual rate of $500 thereafter. The firm's is 12%. What option would you recommend? 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...