Solved

Razorback Corp

question 7

Essay

Razorback Corp. is evaluating whether it should keep its automatic guided vehicle or sell it immediately and purchase a new one. The current vehicle can be sold for $28,000 now; however, with an overhaul of $8250, the current vehicle can last another 5 years. Other relevant costs are shown below. Use a before- tax MARR of 5% per year and determine whether the current vehicle should be replaced. Razorback Corp. is evaluating whether it should keep its automatic guided vehicle or sell it immediately and purchase a new one. The current vehicle can be sold for $28,000 now; however, with an overhaul of $8250, the current vehicle can last another 5 years. Other relevant costs are shown below. Use a before- tax MARR of 5% per year and determine whether the current vehicle should be replaced.

Definitions:

Economic Profit

The difference between total revenue and the sum of explicit and implicit costs.

Marginal Revenue

Marginal Revenue is the additional income received from selling one more unit of a good or service.

Market Price

The present cost at which a service or asset is available for purchase or sale in a specific market.

Profit

The financial gain realized when the amount of revenue gained exceeds the expenses, costs, and taxes involved in sustaining the activity.