Chatham Automotive purchased new electric forklifts to move steel automobile parts two years ago. They cost $70,000
Question:
Chatham Automotive purchased new electric forklifts to move steel automobile parts two years ago. They cost $70,000 each, including the charging stand. In practice, it was found that they did not hold a charge as long as claimed by the manufacturer, so operating costs are very high. As a result, their current salvage value is about $ 11,000. Chatham is considering replacing them with propane models. New propane forklifts cost $ 58,000 each. After one year, they have a salvage value of $ 40,000and thereafter decline in value at a declining-balance depreciation rate of 20 percent, as does the electric model from this time on. The MARR is 7 percent. Operating costs for the electric model will be $ 20,000 this year, rising by 11 percent per year. Operating costs for the propane model will initially be $ 12,000 over the first year, rising by 11 percent per year. Should Chatham Automotive replace the forklifts now?
Chatham Automotive ( should or should not) replace the forklifts now since the minimum total EAC for the electric forklifts is $ enter your response here, which is(lower or higher) than $ enter your response here, the minimum total EAC for the propane forklifts.
(Round to the nearest dollar as needed.)
View the table of compound interest factors for discrete compounding periods when i=7%.
Intermediate Accounting
ISBN: 978-0176509736
10th Canadian Edition, Volume 1
Authors: Donald Kieso, Jerry Weygandt, Terry Warfield, Nicola Young,