Question

Asked Mar 18, 2020

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An asset costing $10,000 has the salvage values and operating cost shown below. Using 8%, when should the asset be replaced with an identical part?

End of Year | Salvage | Operating Cost |

1 | 6000 | 2300 |

2 | 4000 | 2500 |

3 | 3200 | 3300 |

4 | 2500 | 4800 |

5 | 2000 | 6800 |

6 | 1800 | 9500 |

7 | 1700 | 12,000 |

Step 1

Calculate the net cash outflow as follows:

Formulas:

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