You own several copiers that are currently valued at $10 000 altogether. Annual operating and maintenance costs for all copiers are estimated at $9000 next year, increasing by 10 percent each year thereafter. Salvage values decrease at a rate of 20 percent per year. You are considering replacing your existing copiers with new ones that have a suggested retail price of $25 000. Operating and maintenance costs for the new equipment will be $6000 over the first year, increasing by 10 percent each year thereafter. The salvage value of the new equipment is well approximated by a 20 percent drop from the suggested retail price per year. Furthermore, you can get a trade-in allowance of $12 000 for your equipment if you purchase the new equipment at its suggested retail price. Your MARR is 8 percent. Should you replace your existing equipment now?

Answer rating: 100% (QA)

Answer The present value of the old equipment is 10000 The present value of the new equipment is 12... View the full answer