Business, 09.03.2021 01:00 jakobrobinette

The production manager on the Ofon Phase 2 offshore platform operated by Total S. A. must purchase specialized environmental equipment or an equivalent service. The first cost is $250,000 with an AOC of $80,000. The manager has let it be known that he does not care about the salvage value because he thinks it will make no difference in the decision-making process. His supervisor estimates the salvage might be as high as $100,000 or as low as $10,000 in 3 years, at which time the equipment will be unnecessary. Alternatively, a subcontractor can provide the service for $225,000 per year. The total offshore project MARR is 10% per year. Determine if the decision to buy the equipment is sensitive to the salvage value.

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The production manager on the Ofon Phase 2 offshore platform operated by Total S. A. must purchase s...

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