A construction company purchased a bulldozer 5 years ago, Ask an Expert

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A construction company purchased a bulldozer 5 years ago for $150K. It has been depreciated to a book value of $50K. The Caterpillar Company salesman has proposed replacing it with a new model for $160K. and taking the present bulldozer in trade for $60K. It is estimated the current bulldozer will last 5 more years with an annual O&M of $8K/year and can be sold then for $5K. The salesman claims the new bulldozer is much more reliable and will only have O&M costs of $3K/year, last 15 years and still be salvaged for $ 10K. Company MARR is 10%. Is this a transaction that should be made this year?

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91924894

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