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You are considering whether to replace an existing flow meter. The existing flow meter can be sold now for $50 or it can be sold in one year for $10. It will cost $30 to operate and maintain over the next year (in end of year value). A new meter costs 400$ and has a 10-year life. It can be sold for $40 at the end of its life. The new meter costs $14 per year to operate and maintain. Assume there is no corporate tax and your firm uses a cost of capital of 12% for projects such as this.

Do you recommend replacing the old meter immediately?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91549679

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