Use the opportunity cost approach

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Reference no: EM131091996

A specialty concrete mixer used in construction was purchased for $300,000 5 years ago. It is MACRS-GDS 5-year property. Its annual O&M costs are $105,000. The remaining useful life is 8-years and the end of the 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 after-tax MARJR. of 9% 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. Use the opportunity cost approach (outsider's viewpoint approach)

Reference no: EM131091996

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