The Greenleaf Company is considering purchasing a new

set of #4927
The Greenleaf Company is considering purchasing a new set of air-electric quill units to replace
an obsolete one. The machine currently being used for the operation has a market value of
zero. However, it is in good working order, and it will last for at least an additional five years.
The new quill units will perform the operation with so much more efficiency that the firm's
engineers estimate that labor, material, and other direct costs will be reduced $3,000 a year if
the units are installed. The new set of quill units costs $10,000 delivered and installed, and its
economic life is estimated to be five years with zero salvage value. The firm's MARR is 13%.(a)
What investment is required to keep the old machine?(b) Compute the cash flow to use in the
analysis for each option.(c) If the firm uses the internal-rate-of-return criterion, should the firm
buy the new machine on that basis?View Solution:
The Greenleaf Company is considering purchasing a new set of

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