2-26 An refinisher of antiques named Constance has been so successful with her s

Question

2-26 An refinisher of antiques named Constance has been so successful with her small business that she is plan- ning to expand her shop with all new equipment. She is going to start enlarging her shop by purchasing the following equipment. al er Cost of Power- Original Original Sizing Equipment New Equipment Size Equipment Exponent Varnish bath Power scraper 3/4 hp 250 0.22 Paint booth Size 75 I 1.5 hp 12 m3 50 1 3500 0.80 3000 0.6 What would be the net cost to Constance to obtain this equipment-assume that she can trade the old equip- ment in for 15% of its original cost. Assume also that the relative price to purchase the equipment has not changed over time (that is, there has been no inflation in equipment prices) or of

Explanation / Answer

SOLUTION:

Equipment New Equipment Cost Trade-In Value Net Cost Varnish Bath (75/50)0.80 * (3,500) = $4,841 $3,500 * 0.15 = 525 $4,316 Power Scraper (1.5/0.75)0.22 * (250) = $291 $250 * 0.15 = 37.50 $254 Paint Booth (12/3)0.6 * (3,000) = $6,892 $3,000 * 0.15 = 450 $6,442 Total $11,012

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