(Solved) : Caterpillar Salesperson Comes Office Describes New Front End Loader Say Save Money Accord Q40719084 . . .
A. Caterpillar salesperson comes to your office and describes anew front-end loader that they say will save you money. Accordingto the literature it will cost $152,000 and has an effectiveservice life of 12 years at which time it has a typical salvage(resale) value of $65,000. Your research indicates that thisliterature is indeed accurate. You review your productivity dataand estimate that this equipment will save you 2,000 per month. Themachine will, however, require a fixed monthly maintenance cost of$600. Your alternative investment would earn 4 percent for 5 yearsand 6 percent for the following 7 years (compounded yearly). Wouldthe equipment be a good purchase or should you invest in thealternative account?