Allen Construction purchased a crane 6 years ago for $130,000. They need a crane of this capacity for the next five years. Normal operation costs $35,000 per year. The current crane will have no salvage value at the end of 5 more years. Allen can trade in the current crane for its market value of $40,000 toward the purchase of a new one that costs $150,000. The new crane will cost only $8000 per year under normal operating conditions and will have a salvage value of $55,000 after 5 years. If MARR is 20%, determine which option is preferred.

a.	Use the cash flow approach (insider's viewpoint approach).

b.	Use the opportunity cost approach (outsider's viewpoint approach).

Answer rating: 100% (QA)

To determine which option is preferred well compare the cash flows of keeping the current crane vers... View the full answer