After 8 years of use, the heavy-truck engineoverhaul equipment at Pete’s Truck Repair was evaluated for replacement. Pete’s accountant used an after-tax MARR of 8% per year, Te of 30%, and a current market value of $25,000 to determine AW = $2100. The new equipment costs $75,000, uses SL depreciation over a 10-year recovery period, and has a $15,000 salvage estimate. Estimated CFBT is $15,000 per year. Pete asked his engineer son Ramon to determine if the new equipment should replace what is owned currently. From the accountant, Ramon learned the current equipment cost $20,000 when purchased and reached a zero book value several years ago. Help Ramon answer his father’s question.
After 8 years of use, the heavy-truck engineoverhaul
equipment at Pete’s Truck Repair was
evaluated for replacement. Pete’s accountant used
an after-tax MARR of 8% per year, Te of 30%, and
a current market value of $25,000 to determine
AW = $2100. The new equipment costs $75,000,
uses SL depreciation over a 10-year recovery
period, and has a $15,000 salvage estimate.
Estimated CFBT is $15,000 per year. Pete asked
his engineer son Ramon to determine if the new
equipment should replace what is owned currently.
From the accountant, Ramon learned the current
equipment cost $20,000 when purchased and
reached a zero book value several years ago. Help
Ramon answer his father’s question.
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