A construction company excavator will take. A new excavator costs $150,000, lifespan 10 years, scrap value $25,000. The daily operating cost is $130. The annual repair-maintenance expense is estimated at $6,000. Alternatively, if an excavator is rented, the daily rental cost is $350. And there is no other expense. The firm's cost of capital is 25%. In this case, would you approve the purchase of the excavator?

A construction company excavator will take. A new excavator costs $150,000, lifespan 10 years, scrap value $25,000. The daily operating cost is $130. The annual repair-maintenance expense is estimated at $6,000. Alternatively, if an excavator is rented, the daily rental cost is $350. And there is no other expense. The firm's cost of capital is 25%. In this case, would you approve the purchase of the excavator?

Cornerstones of Cost Management (Cornerstones Series)

4th Edition

ISBN:9781305970663

Author:Don R. Hansen, Maryanne M. Mowen

Publisher:Don R. Hansen, Maryanne M. Mowen

Chapter19: Capital Investment

Section: Chapter Questions

Problem 4CE: Manzer Enterprises is considering two independent investments: A new automated materials handling...

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