A specialty concrete mixer used in construction was purchased for $300,000 7 years ago. It is...
A specialty concrete mixer used in construction was purchased
for $300,000 7 years ago. It is MACRS-GDS 5-year
property. Its annual O&M costs are $105,000. At the end of an
8-year planning horizon, the mixer will have a
salvage value of $5,000. If the mixer is replaced, a new mixer will
require an initial investment of $375,000, and at
the end of the 8-year planning horizon, the new mixer will have a
salvage value of $45,000. Its annual O&M cost
will be only $40,000 due to newer technology. Use an EUAC measure,
a tax rate of 40 percent, and an after-tax
MARR of 9 percent to perform an after-tax analysis to see if the
concrete mixer should be replaced if the old mixer is
sold for its market value of $65,000.
a. Use the cash flow approach (insider’s viewpoint approach).
(11.2.2)
b. Use the opportunity cost approach (outsider’s viewpoint
approach). (11.3.2)
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A specialty concrete mixer used in construction was purchased
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