Vienna Laundry Services (VLS) is investigating replacement of a laundry and dry cleaning operation they bought eight years ago for $60,000 and which is fully depreciated. Another company is willing to buy the operation for $25,000 if VLS performs a major overhaul before transferring the operation to them. This overhaul will cost VLS $5,000. If the system is not sold, the estimated resale values, maintenance, and removal costs are as shown in Table 1.
A new system can be bought for $70,000 with an installation cost of $10,000. The estimated resale values, maintenance, and removal costs of the new system would be as shown in Table 2. It can be assumed that the productivity and operational cost of both systems are going to be the same. Tax and depreciation are not going to be considered.
Analyze this problem for VLS and make clear recommendations. Use a MARR of 10%. Show all your cash flow diagrams and details of any calculations.
