• 9.23) A company that makes micro motion compact Coriolis meters purchased a new packaging system for $600,000. The estimated salvage value was $28,000 after 10 years. Currently, the expected remaining life is 7 years with an AOC of 27,000 per year and an estimated salvage value of $40,000. The company is considering early replacement of the system with one that costs $370,000 and has a 12-year economic service life, a $22,000 salvage value and an estimated AOC of $50,000 per year. If the MARR for the corporation is 12% per year, find the minimum trade-in (replacement) value necessary now to make the replacement economically advantageous.
• 9.23) A company that makes micro motion compact Coriolis meters purchased a new packaging system for $600,000. The estimated salvage value was $28,000 after 10 years. Currently, the expected remaining life is 7 years with an AOC of 27,000 per year and an estimated salvage value of $40,000. The company is considering early replacement of the system with one that costs $370,000 and has a 12-year economic service life, a $22,000 salvage value and an estimated AOC of $50,000 per year. If the MARR for the corporation is 12% per year, find the minimum trade-in (replacement) value necessary now to make the replacement economically advantageous.
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 9P
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Transcribed Image Text:• 9.23) A company that makes micro motion compact Coriolis
meters purchased a new packaging system for $600,000. The
estimated salvage value was $28,000 after 10 years. Currently,
the expected remaining life is 7 years with an AOC of 27,000
per year and an estimated salvage value of $40,000. The
company is considering early replacement of the system with
one that costs $370,000 and has a 12-year economic service
life, a $22,000 salvage value and an estimated AOC of $50,000
per year. If the MARR for the corporation is 12% per year, find
the minimum trade-in (replacement) value necessary now to
make the replacement economically advantageous.
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