Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 36

After 8 years of use, the heavy truck engine overhaul equipment at Pete's Truck Repair was evaluated for replacement. Pete's accountant used an after-tax MARR of 8% per year, T e = 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.