Question: 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?