- A A New Boiler Can Be Purchased For Rm84 000 Its Expected Useful Life Is Six Years At Which Time Its Market Value Wi 1 (215.9 KiB) Viewed 17 times
(a) A new boiler can be purchased for RM84,000. Its expected useful life is six years, at which time its market value will be zero. Annual receipts less expenses will be approximately RM18,000 per year over the six-year study period. Use the AW method and a MARR of 18% to determine whether this is a good investment [5 Marks] [C4] (b) Freezer used in chemistry laboratory has a cost basis of RM48,000 and is expected to have a RM10,000 salvage value when replaced after 30,000 hours of use. Calculate its depreciation rate per hour of use. [5 Marks] [C4] (c) The Ajax Corporation has an overhead crane that has an estimated remaining life of 10 years. The crane can be sold now for RM8,000. If the crane is kept in service, it must be overhauled immediately at a cost of RM5,000. Operating and maintenance costs will be RM3,000 per year after the crane is overhauled. The overhauled crane will have zero MV at the end of the 8-year study period. A new crane will cost RM20,000, will last for 8 years, and will have a RM4,000 MV at that time. Operating and maintenance costs are RM1,000 per year for the new crane. The company uses a before-tax interest rate of 10% per year in evaluating investment alternatives. Should the company replace the old crane? [10 Marks] [C4]