A company that makes micro motion compact coriolis meters purchased a new packaging system for $600,000. The estimated salvage value was$28,000 after 10 years. Currently the expected remaining life is 7 years with an AOC of $27,000 per year and an estimated salvage value of $40,000.The company is considering early replacement of the system with one that costs $370,000 and has a 12-year economic service life, a $22,000 salvagevalue, and an estimated AOC of $50,000 per year. If the MARR for the corporation is 12% per year, find the minimum trade-in value necessary now to make the replacement economically advantageous.
A company that makes micro motion compact coriolis meters purchased a new packaging system for $600,000. The estimated salvage value was$28,000 after 10 years. Currently the expected remaining life is 7 years with an AOC of $27,000 per year and an estimated salvage value of $40,000.The company is considering early replacement of the system with one that costs $370,000 and has a 12-year economic service life, a $22,000 salvagevalue, and an estimated AOC of $50,000 per year. If the MARR for the corporation is 12% per year, find the minimum trade-in value necessary now to make the replacement economically advantageous.
Chapter9: Capital Budgeting And Cash Flow Analysis
Section: Chapter Questions
Problem 9P
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A company that makes micro motion compact coriolis meters purchased a new packaging system for $600,000. The estimated salvage value was
$28,000 after 10 years. Currently the expected remaining life is 7 years with an AOC of $27,000 per year and an estimated salvage value of $40,000.
The company is considering early replacement of the system with one that costs $370,000 and has a 12-year economic service life, a $22,000 salvage
value, and an estimated AOC of $50,000 per year. If the MARR for the corporation is 12% per year, find the minimum trade-in value necessary now to make the replacement economically advantageous.
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