A currently used machine costs $7,000 annually to run. What is the maximum that should be paid to replace the machine with one that will last 4 years and will cost only $3,000 annually to run? The opportunity cost of capital is 14 %. The maximum amount that should be paid is: $ (please round your final result to 2 decimals, but keep as many decimals as possible during calculation)

Consider the following two tractors a company can purchase. The following tables provide the costs the company will incur (in thousands of dollars) in the lifetime of each tractor.

	Initial Cost	Operating Costs per Year	Expected Life
Diesel	$16,000	$6,000	6
Gasoline	$7,000	$14,000	4

The transportation firm can only afford one of the tractors. The two tractors have identical production capabilities. The firm's cost of capital is 2%.

Find the present value of the costs of using the two tractors.

Diesel =

Gasoline =

Answer rating: 100% (QA)

SOLUTION To determine the present value of the costs of using the two tractors we need to calculate the present value of the operating costs for each tractor taking into account the expected life and ... View the full answer