Flilane Tire Company needs to overhaul its auto lift system or buy a new one.The facts have been gathered,and they are as follows:
$$\begin{array} { | l | r | r | }
\hline & \text { Current Machine } & \text { New Machine } \
\hline \text { Purchase Price, New } & \$ 123,750 & \$ 162,800 \
\hline \text { Current book value } & 36,850 & \
\hline \text { Overhaul needed now } & 30,250 & \
\hline \text { Annual cash operating costs } & 69,300 & 52,800 \
\hline \text { Current salvage value } & 44,000 & \
\hline \text { Salvage value in five years } & 8,800 & 38,500 \
\hline
\end{array}$$ Required:
Which alternative is the most desirable with a current required rate of return of 15%? Show computations,and assume no taxes.

Question

Flilane Tire Company needs to overhaul its auto lift system or buy a new one.The facts have been gathered,and they are as follows:
 $$\begin{array} { | l | r | r | } 
\hline & \text { Current Machine } & \text { New Machine } \
\hline \text { Purchase Price, New } & \$ 123,750 & \$ 162,800 \
\hline \text { Current book value } & 36,850 & \
\hline \text { Overhaul needed now } & 30,250 & \
\hline \text { Annual cash operating costs } & 69,300 & 52,800 \
\hline \text { Current salvage value } & 44,000 & \
\hline \text { Salvage value in five years } & 8,800 & 38,500 \
\hline
\end{array}$$ Required:
Which alternative is the most desirable with a current required rate of return of 15%? Show computations,and assume no taxes.

Quizplus · Accepted Answer

The Answer of Flilane Tire Company needs to overhaul its auto lift system or buy a new one.The facts have been gathered,and they are as follows:
 $$\begin{array} { | l | r | r | } 
\hline & \text { Current Machine } & \text { New Machine } \
\hline \text { Purchase Price, New } & \$ 123,750 & \$ 162,800 \
\hline \text { Current book value } & 36,850 & \
\hline \text { Overhaul needed now } & 30,250 & \
\hline \text { Annual cash operating costs } & 69,300 & 52,800 \
\hline \text { Current salvage value } & 44,000 & \
\hline \text { Salvage value in five years } & 8,800 & 38,500 \
\hline
\end{array}$$ Required:
Which alternative is the most desirable with a current required rate of return of 15%? Show computations,and assume no taxes.

Flilane Tire Company Needs to Overhaul Its Auto Lift System