Steve Hausmann, a production engineer at Euro Fashion-USA, a European-style furniture company, was considering replacing a 1,000 lb capacity industrial forklift truck, which was purchased three years ago for $18,000. The truck was being used to move assembled furniture from the finishing department to the warehouse. Recently, the truck had not been dependable and had been frequently out of service while awaiting repairs, a situation that eventually cost the company $3,000. Maintenance expenses were rising steadily. When the truck was not available, the company had to rent one. In addition, the forklift truck was diesel operated, and workers in the plant were complaining about the air pollution. If retained, the truck would have required an immediate engine overhaul to keep it in operablecondition. The overhaul would have neither extended the originally estimated service life nor increased the value of the truck. Steve has found that the current truck has a book value of $0 (fully depreciated) and a market value of $7,500 today.Steve is considering an electric forklift truck as a replacement, which wouldeliminate the air-pollution problem entirely. The new electric lift truck is quoted at $20,000. The equipment dealer will allow Steve $8,000 as trade-in on a new truck. What value(s) for the defender is (are) relevant in our analysis?
Steve Hausmann, a production engineer at Euro Fashion-USA, a European-style furniture company, was considering replacing a 1,000 lb capacity industrial forklift truck, which was purchased three years ago for $18,000. The truck was being used to move assembled furniture from the finishing department to the warehouse. Recently, the truck had not been dependable and had been frequently out of service while awaiting repairs, a situation that eventually cost the company $3,000. Maintenance expenses were rising steadily. When the truck was not available, the company had to rent one. In addition, the forklift truck was diesel operated, and workers in the plant were complaining about the air pollution. If retained, the truck would have required an immediate engine overhaul to keep it in operable
condition. The overhaul would have neither extended the originally estimated service life nor increased the value of the truck. Steve has found that the current truck has a book value of $0 (fully
Steve is considering an electric forklift truck as a replacement, which would
eliminate the air-pollution problem entirely. The new electric lift truck is quoted at $20,000. The equipment dealer will allow Steve $8,000 as trade-in on a new truck. What value(s) for the defender is (are) relevant in our analysis?
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