Fudd and Nephews, Inc., purchased a small excavator for $100,000 two years ago. The excavatorwas supposed to generate a net benefit of $30,000 per year, but it has generated only $5,000 peryear. It is expected to generate the same amount of net benefit of $5,000 for the next four years,with a negligible market value after these four years. Another contractor offers to purchase themachine for $15,000 now. Fudd can get 13.0% on his investments. Should he sell the machine, orkeep using it for the remaining of its economic life?

Fudd and Nephews, Inc., purchased a small excavator for $100,000 two years ago. The excavatorwas supposed to generate a net benefit of $30,000 per year, but it has generated only $5,000 peryear. It is expected to generate the same amount of net benefit of $5,000 for the next four years,with a negligible market value after these four years. Another contractor offers to purchase themachine for $15,000 now. Fudd can get 13.0% on his investments. Should he sell the machine, orkeep using it for the remaining of its economic life?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 10P

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