1. An entrepreneurial civil engineer who owns his own design/build company purchased a small crane 2 years ago at a cost of $71,000. At that time, it was expected to be used for 10 years with an annual cost of $15,000 per year and then traded in for its salvage value of $10,000. Due to increased construction activities, the company would prefer to trade for a new, larger crane now which will cost $93,000. The company estimates that the old crane can be used, if necessary, for another 4 years, at which time it will have a $25,000 estimated market value. Its current market value is estimated to be $39,000, and if it is used for another 4 years, it will have M&O costs (exclusive of operator costs) of $17,000 per year. Determine the annual worth of the presently-owned crane if a replacement analysis is performed today and the company’s MARR is 10% per year.

(a) $-27,0248 (b) $-26,329 (c) $-25,927 (d) $-24,917 (e) $-23,917

2. Which one of the following will have the highest priority when a bankrupt firm’s assets are distributed if the absolute priority rule is followed?

preferred stockholders

secured creditors

unsecured creditors

common shareholders