When to Replace an Asset: Nemo Haulers Is Considering Whether

question 30

Multiple Choice

When to replace an asset: Nemo Haulers is considering whether to purchase a new mini tractor for moving furniture within its warehouse. Nemo calculates that its current mini tractor generates $3,100 of cash flow per year. A new mini tractor would cost $3,000 and would provide cash flow of $4,000 per year for five years. What is the equivalent annual cash flow for the new mini tractor (round to the nearest dollar) , and should Nemo purchase the new tractor? Assume the cost of capital for Nemo is 10 percent.

• A) $3,000, do not purchase the new tractor
• B) $3,209, purchase the new tractor
• C) $4,000, purchase the new tractor
• D) $12,163, purchase the new tractor

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Definitions:

Rite of Passage

A ceremonial event or practice marking an important stage in an individual's life, especially significant transitions such as puberty, marriage, or death.

Social Death

The condition of people not accepted as fully human by wider society, a concept applied to extreme social exclusion.

Rebirth

The process of being reborn or undergoing a complete renewal or revival.

Marriage Rituals

The ceremonies and practices that mark the formal union of two individuals as partners in a personal relationship, varying widely among cultures.