You Are Considering Replacing Your Current Dado Cutter with a New

question 32

Essay

You are considering replacing your current dado cutter with a new machine. The current machine is expected to last three more years but faces increasing repair costs of $2,500; $3,500; and $4,000 over the three years. You could salvage the machine now for $5,000; and then $3,000; $1,500; and 0 thereafter. The new dado cutter would cost $12,000 and require upkeep of $1,500 a year. The machine would last six years and be salvaged for $1,000. Should you replace the old machine now or wait one year? (Assume the tax rate is 0% and the cost of capital is 11%).

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Definitions:

Grafting

A horticultural technique where tissues of plants are joined so as to continue their growth together, often used to propagate fruit trees or repair damaged plants.

Polyploidy

Condition of having three or more of each type of chromosome characteristic of the species.

Inducing Cutting

The process of stimulating the division or propagation of plants through the cutting of plant parts.

Phototropism

The growth or movement response of a plant part toward or away from light, demonstrating how plants adapt to their environment for optimal light absorption.