At the end of 2021, Sheridan Company has accounts receivable of $730,400 and an allowance for doubtful accounts of $34,000. On January 24, 2022, it is learned that the company’s receivable from Madonna Inc. is not collectible and therefore management authorizes a write-off of $7,300.

Yes

Explanation:

According to the scenario, computation of the given data are as follow:-

We can calculate the annual equivalent cost by using following formula:-

Annual Equivalent Cost (AEC) = Initial Cost × [Interest Rate × (1 + Interest Rate)^Number of years ÷  (1 + Interest Rate)^Number of years - 1} + Annual Cost Per Year

= $100,000 × [0.06 × (1 + 0.06)^25 ÷ (1 + 0.06)^25 - 1] + $10,000

= $100,000 × [0.06 × 4.291871 ÷ 4.291871 - 1] + $10,000

= $100,000 × [0.2575123 ÷ 3.291871] + $10,000

= $100,000 × 0.07823 + $10,000

= $7,823 + $10,000

= $17,823

According to the analysis, the annual cost of new pipeline $17,823 is less than 40,000. So the new pipeline should built.