The operations manager of a current transport company to change the most modern system on the market. (The current one already has a year of use in the company)   current proposal 1  proposal 2 Initial cost of a “zero km” 50,000 75,000 130,000 Expected life 2 years old 3 years old 6 years old Annual cost(in today's currency) 7,000 9,000 6,000 Residual Value 10,000 13,000 28,000 Assuming linear depreciation. Given a real interest rate of 12% per annum, should I replace the current equipment today? If yes, why? Should I replace the current equipment at the end of its life with another one? If yes, why?

Essentials Of Investments
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ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
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The operations manager of a current transport company to change the most modern system on the market. (The current one already has a year of use in the company)

  current proposal 1  proposal 2
Initial cost of a “zero km” 50,000 75,000 130,000
Expected life 2 years old 3 years old 6 years old
Annual cost(in today's currency) 7,000 9,000 6,000
Residual Value 10,000 13,000 28,000


Assuming linear depreciation. Given a real interest rate of 12% per annum, should I replace the current equipment today? If yes, why? Should I replace the current equipment at the end of its life with another one? If yes, why?

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