Forrester Tire Company needs to overhaul its auto lift system or purchase a new one. The facts have been gathered, and they are as follows: 21-4 Current Machine New Machine Purchase price, new $123,750 $162,800 Current book value 36,850 Overhaul needed now 30,250 Annual cash operating costs 69,300 52,800 Current salvage value 44,000 Salvage value in 5 years 8,800 38,500 Which alternative is the most desirable with a current required rate of return of 14%? Show computations, and assume no taxes
Forrester Tire Company needs to overhaul its auto lift system or purchase a new one. The facts have been gathered, and they are as follows: 21-4 Current Machine New Machine Purchase price, new $123,750 $162,800 Current book value 36,850 Overhaul needed now 30,250 Annual cash operating costs 69,300 52,800 Current salvage value 44,000 Salvage value in 5 years 8,800 38,500 Which alternative is the most desirable with a current required rate of return of 14%? Show computations, and assume no taxes
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Forrester Tire Company needs to overhaul its auto lift system or purchase a new one. The facts have been gathered, and they are as follows: 21-4 Current Machine New Machine Purchase price, new $123,750 $162,800 Current book value 36,850 Overhaul needed now 30,250 Annual cash operating costs 69,300 52,800 Current salvage value 44,000 Salvage value in 5 years 8,800 38,500 Which alternative is the most desirable with a current required rate of return of 14%? Show computations, and assume no taxes
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