Should replace the loader

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Point 1: A backhoe loader will last for only one more year. It costs $12,500 a year to maintain. For $50,000 you can buy a new loader that can last for 8 years and should require maintenance costs of only $5,000 a year.

Question 1: If the discount rate is 10% per year, should you replace the loader?

Question 2: What if the discount rate is 2% per year? Why does your answer change?

Reference no: EM132493867

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