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Flo's Frozen Yogurt shop is evaluating new dispensing machines. The Flownator has a first cost of $31665...

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Finance

Flo's Frozen Yogurt shop is evaluating new dispensingmachines.

The Flownator has a first cost of $31665 and annual expenses of$9985 that will increase by $402 per year. It will require anoverhaul at the end of year 5 at a cost of $5098. The Flownatorwill save $19666 per year in labor costs. The Flownator has asalvage value of $9706 and a lifespan of 11 years.

The YogGoo300 has a first cost of $22414 and annual expenses of$3837 that will increase by 3% per year. The YogGoo300 will saveFlo's $10246 per year in labor costs. The YogGoo300 has a lifespanof 5 years.

What must the salvage value of the YogGoo30 be to make itequally desirable to the Flownator? Use a MARR of 3% to make yourcalculation.

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