Allen Construction purchased a crane 6 years ago for $130,000. They need a crane of this capacity for the next five years. Norma
l operation costs $35,000 per year. The current crane will have no salvage value at the end of 5 more years. Allen can trade in the current crane for its market value of $40,000 toward the purchase of a new one that costs $150,000. The new crane will cost only $8000 per year under normal operating conditions and will have a salvage value of $55,000 after 5 years. If MARR is 20%, determine which option is preferred.
a. Use the cash flow approach (insider's viewpoint approach).
b. Use the opportunity cost approach (outsider's viewpoint approach).
a. Use the cash flow approach (insider's viewpoint approach).
b. Use the opportunity cost approach (outsider's viewpoint approach).
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