2. You have spent $22,000 to fix a crane you own over the past two years....

  

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2. You have spent $22,000 to fix a crane you own over the past two years. Today, your crane broke again. The authorized dealership is asking $61,000 to fix it now and is telling you that the repair is not going to be permanent and will add a new maintenance cost of $9,000 per year. Now you have two alternative to choose from: • Defender: fix the crane and keep using it for another 7 years. The crane will have no salvage value at the end of the designated term. • Challenger: buy a used crane by borrowing money from your local bank. The loan is going to be $30,000, paid at the end of each year, for 7 years. The cost of ownership for the challenger is $5,500 per year. If you go with the Challenger option, you are going to sell your existing crane for 50,000 dollars. The Challenger crane will have a salvage value of $9,000 at the end of the 7 year. Find the better alternative using the NPW analysis. Use an interest rate of 10 percent for this problem. (10 Marks) 2. You have spent $22,000 to fix a crane you own over the past two years. Today, your crane broke again. The authorized dealership is asking $61,000 to fix it now and is telling you that the repair is not going to be permanent and will add a new maintenance cost of $9,000 per year. Now you have two alternative to choose from: • Defender: fix the crane and keep using it for another 7 years. The crane will have no salvage value at the end of the designated term. • Challenger: buy a used crane by borrowing money from your local bank. The loan is going to be $30,000, paid at the end of each year, for 7 years. The cost of ownership for the challenger is $5,500 per year. If you go with the Challenger option, you are going to sell your existing crane for 50,000 dollars. The Challenger crane will have a salvage value of $9,000 at the end of the 7 year. Find the better alternative using the NPW analysis. Use an interest rate of 10 percent for this problem. (10 Marks)

Answer rating: 100% (QA)

Purchasing the crane by acquiring would be more productive since here the devaluation and the advanc... View the full answer