A firm owns a pressure vessel that it is contemplating replacing. The old pressure vessel has annual operating and maintenance expenses of R60,000 per year and it can be kept for five more years, at which time it will have zero market value (MV). It is believed that R30,000 could be obtained for the old pressure vessel if it were sold now. A new pressure vessel can be purchased for R120,000. The new pressure vessel will have a MV of R50,000 in five years and will have annual operating and maintenance expenses of R30,000 per year. Using a before-tax MARR of 20% per year, determine whether or not the old pressure vessel should be replaced. A study period of five years is appropriate.

Answer rating: 100% (QA)

Annual cost 60000 Market Value 30000 Remaining life 5 years Salvage valu... View the full answer