A $25,000 machine that has been used for one year has a salvage value of $16,000 now, which will drop by $4000 per year. The maintenance costs for the next 4 years are $1250, $1450, $1750, and $2250. When the machine is sold, it will cost $2000 to remove and sell. When the machine was purchased, the estimated salvage value in 5 years was $3500. What are the relevant costs for the machine?
A $25,000 machine that has been used for one year has a salvage value of $16,000 now, which will drop by $4000 per year. The maintenance costs for the next 4 years are $1250, $1450, $1750, and $2250. When the machine is sold, it will cost $2000 to remove and sell. When the machine was purchased, the estimated salvage value in 5 years was $3500. What are the relevant costs for the machine?
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 3P
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A $25,000 machine that has been used for one year has a salvage value of $16,000 now, which will drop by $4000 per year. The maintenance costs for the next 4 years are $1250, $1450, $1750, and $2250. When the machine is sold, it will cost $2000 to remove and sell. When the machine was purchased, the estimated salvage value in 5 years was $3500. What are the relevant costs for the machine?
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