Clin Corporation haa an overhead crane that has an estimated remaining life of 10 years. The crane
Question:
Clin Corporation haa an overhead crane that has an estimated remaining life of 10 years. The crane can be sold now for 800,000. If the crane is kept in service, it must be overhauled immediately at the cost of 400,000. Operating and maintenance costs will be 300,000 per year after the crane is overhauled. The overhauled crane will have zero market value at the end of the 10-year study period. A new crane will cost 1.8M and can lasy for 10 years with a market value of 400,000 at that time. Operating and maintenance costs are 100,000 per year for the new crane. The company uses an after-tax interest rate of 10% per year in evaluating investment alternatives. Should the company replace the old crane?
Fundamental Accounting Principles Volume II
ISBN: 978-1259066511
14th Canadian Edition
Authors: Larson Kermit, Jensen Tilly