Three years ago, Witt Gas Controls purchased equipment for $80,000 that was expected to have a useful

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Three years ago, Witt Gas Controls purchased equipment for $80,000 that was expected to have a useful life of 5 years with a $9000 salvage value. Increased demand necessitated an upgrade costing $30,000 one year ago. Technology changes now require that the equipment be upgraded again for another $25,000 so that it can be used for 3 more years. Its annual operating cost will be $47,000, and it will have a $22,000 salvage after 3 years. Alternatively, it can be replaced with new equipment that will cost $68,000 with operating costs of $35,000 per year and a salvage value of $21,000 after 3 years. If replaced now, the existing equipment will be sold for $9000. Calculate the annual worth of the defender at an interest rate of 10% per year.


Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
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Related Book For  answer-question

Engineering economy

ISBN: 978-0073376301

7th Edition

Authors: Leland Blank, Anthony Tarquin

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