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Replacement: Should you retain or purchase a new lift?

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A forklift will last for only 3 more years. It costs $5,000 a year to maintain. For $20,000 you can buy a new lift that can last for 10 years and should require maintenance costs of only $2,000 a year.

If the discount rate is 5 percent per year, should you replace the forklift?

What if the discount rate is 12 percent per year? Why does your answer change?

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Solution Summary

The expert determines whether you should retain or purchase a new lift. Replacement and discount rates are examined.

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  • MBA (IP), International Center for Internationa Business
  • BBA, University of Rajasthan
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