Question;Columbia Enterprises is studying the replacement of some equipment that originally cost$74,000. The equipment is expected to provide six more years of service if $8,700 ofmajor repairs are performed in two years. Annual cash operating costs total $27,200.Columbia can sell the equipment now for $36,000, the estimated residual value in sixyears is $5,000.New equipment is available that will reduce annual cash operating costs to $21,000. Theequipment costs $103,000, has a service life of six years, and has an estimated residualvalue of $13,000. Company sales will total $430,000 per year with either the existing orthe new equipment. Columbia has a minimum desired return of 12% and depreciates allequipment by the straight-line method.Instructions:a. By using the net-present-value method, determine whether Columbia should keepits present equipment or acquire the new equipment. Round all calculations to thenearest dollar, and ignore income taxes.
Paper#41400 | Written in 18-Jul-2015Price : $22