You are considering whether to replace an existing flow meter. The existing meter can be sold now for $50 or it can be sold in 1 year for $10. It costs $30 per year to operate and maintain. A new meter costs $400 and has a 10-year life. It could be sold for $40 at the end of its life. The new meter costs $14 per year to operate and maintain. What do you recommend if the cost of capital is 12% (Use the EAC method to identify which of the three decisions is most viable)?

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
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You are considering whether to replace an existing flow meter. The existing meter can be
sold now for $50 or it can be sold in 1 year for $10. It costs $30 per year to operate and
maintain. A new meter costs $400 and has a 10-year life. It could be sold for $40 at the
end of its life. The new meter costs $14 per year to operate and maintain. What do you
recommend if the cost of capital is 12% (Use the EAC method to identify which of the
three decisions is most viable)?
Transcribed Image Text:You are considering whether to replace an existing flow meter. The existing meter can be sold now for $50 or it can be sold in 1 year for $10. It costs $30 per year to operate and maintain. A new meter costs $400 and has a 10-year life. It could be sold for $40 at the end of its life. The new meter costs $14 per year to operate and maintain. What do you recommend if the cost of capital is 12% (Use the EAC method to identify which of the three decisions is most viable)?
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