Show full work

Question One: (5 marks) ABC Construction has been awarded a new contract to build a new reaction furnace in northern Alberta. The company needs a new crane for lifting heavy sections and material for this contract. The company is faced with two options: 1) Keep the existing crane or 2) purchase a new crane. The company already owns a crane but it needs $50,000 in repairs (today) in order to meet current safety codes. If sold today, the company can get $150,000 (without repairs) for the existing crane. The contract is for six years. (6 years) The new crane has a service life of 10 years but can be sold in 6 years for $250,000. Financial data related to the two options are shown in Table 1. Using the present worth (PV) method, determine whether the existing crane should be replaced if the firm uses a MARR of 10%? Table 1 Salvage Now Original Cost Annual Cost Service Life Salvage (End of Service Life) $30,000 $150,000 $1,000,000 6 years $300,000 Option#1 Existing Crane Option #2 New Crane $150,000 $1,200,000 $112,500 10 Years