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Hazem Yahia Discussion started by Hazem Yahia 6 years ago
Please help with the following question
10. [Question no: 10 and 11] A production operation is performed with equipment on-hand and labor costs of $75,000 per year. The equipment is very low-maintenance and should last indefinitely. A new equipment item for the same operation, also very low-maintenance but requiring replacement every 6 years, can be purchased for $170,000. It will cut labor costs in half. The firm’s minimum attractive rate-of-return, MARR, is 10 percent. *** [Question no: 6] Should they buy the new equipment.
- True
- False
Ashutosh Maurya, PMP, CCP, PSP
Ashutosh Maurya, PMP, CCP, PSP PW of costs without replacement:
-$75,000 (P/A, 10%, 6) = -$75,000*(4.3553) = -$326,648

PW of costs with replacement (purchase price, but half of the...
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6 years ago