A firm owns a pressure vessel that it is contemplating replacing. The old pressure vessel has annual operating and maintenance expenses of $60,000 per year and it can kept for five more years, at which time it will have zero market value. It is believed that $ 20,000 could be obtained for the old pressure vessel if it were sold now. A new pressure vessel can be purchased for $ 110,000. The pressure vessel will have an market value of $ 50,000 in five years and will have annual operating and maintenance expenses of $30, 000 per year. Using a before - tax MARR of 20% per year, determine whether or not the old pressure vessel should be replaced.

A firm owns a pressure vessel that it is contemplating replacing. The old pressure vessel has annual operating and maintenance expenses of $60,000 per year and it can kept for five more years, at which time it will have zero market value. It is believed that $ 20,000 could be obtained for the old pressure vessel if it were sold now. A new pressure vessel can be purchased for $ 110,000. The pressure vessel will have an market value of $ 50,000 in five years and will have annual operating and maintenance expenses of $30, 000 per year. Using a before - tax MARR of 20% per year, determine whether or not the old pressure vessel should be replaced.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 4E

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