Apricot Computers is considering replacing its material handling system and either purchasing or leasing a new system. The old system has an annual operating and maintenance cost of $31,000, a remaining life of 8 years, and an estimated salvage value of $4,800 at that time. A new system can be purchased for $284,000; it will be worth $24,000 in 8 years; and it will have annual operating and maintenance costs of $16,000/year. If the new system is purchased, the old system can be traded in for $22,000. Leasing a new system will cost $25,000/year, payable at the beginning of the year, plus operating costs of $7,400/year, payable at the end of the year. If the new system is leased, the old system will be sold for $9,600. MARR is 16%. Compare the annual worths of keeping the old system, buying a new system, and leasing a new system based upon a planning horizon of 8 years. Click here to access the TVM Factor Table Calculator For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round answer to 2 decimal places, e.g. 52.75. The absolute cell tolerance is ±1 Part a What is the EUAC of the best option using the cash flow approach? $
Apricot Computers is considering replacing its material handling system and either purchasing or leasing a new system. The old system has an annual operating and maintenance cost of $31,000, a remaining life of 8 years, and an estimated salvage value of $4,800 at that time. A new system can be purchased for $284,000; it will be worth $24,000 in 8 years; and it will have annual operating and maintenance costs of $16,000/year. If the new system is purchased, the old system can be traded in for $22,000. Leasing a new system will cost $25,000/year, payable at the beginning of the year, plus operating costs of $7,400/year, payable at the end of the year. If the new system is leased, the old system will be sold for $9,600. MARR is 16%. Compare the annual worths of keeping the old system, buying a new system, and leasing a new system based upon a planning horizon of 8 years. Click here to access the TVM Factor Table Calculator For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round answer to 2 decimal places, e.g. 52.75. The absolute cell tolerance is ±1 Part a What is the EUAC of the best option using the cash flow approach? $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Apricot Computers is considering replacing its material handling system and either purchasing or leasing a new system. The old
system has an annual operating and maintenance cost of $31,000, a remaining life of 8 years, and an estimated salvage value of $4,800
at that time.
A new system can be purchased for $284,000; it will be worth $24,000 in 8 years; and it will have annual operating and maintenance
costs of $16,000/year. If the new system is purchased, the old system can be traded in for $22,000.
Leasing a new system will cost $25,000/year, payable at the beginning of the year, plus operating costs of $7,400/year, payable at the
end of the year. If the new system is leased, the old system will be sold for $9,600.
MARR is 16%. Compare the annual worths of keeping the old system, buying a new system, and leasing a new system based upon a
planning horizon of 8 years.
Click here to access the TVM Factor Table Calculator
For calculation purposes, use 5 decimal places as displayed in the factor table provided. Round answer to 2 decimal places, e.g. 52.75. The
absolute cell tolerance is ±1
Part a
What is the EUAC of the best option using the cash flow approach?
$
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