Overhead crane that has an estimated remaining life

Reference no: EM13694614

The ajax corporation has an overhead crane that has an estimated remaining life of 10 years. the crane can be sold now for $8,000. If the crane is kept in service, it must be overhauled immediately at a cost of $5,000. Operating and maintenance costs will be $3,000 per year after the crane is overhauled. the overhauled crane will have zero MV at the end of the 8-year study period. a new crane will cost $20,000, will last for 8 years, and will have a $4,000 MV at that time. Operating and maintenance costs are $1,000 per year for the new crane. The company uses a before-tax interest rate of 10% per year in evaluating investment alternatives. Should the company replace the old crane? (9.4)

Reference no: EM13694614

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