A high-speed electronic assembly machine was purchased two years ago for $50,000. At the present time, it
Question:
A high-speed electronic assembly machine was purchased two years ago for $50,000. At the present time, it can be sold for $25,000 and replaced by a newer model having a purchase price of $42,500; or it can be kept in service for a maximum of one more year. The new assembly machine, if purchased, has a useful life of not more than two years. The projected resale values and operating and maintenance costs for the challenger and the defender are shown in the accompanying table on a year-by-year basis. If the before-tax MARR is 15%, when should the old assembly machine be replaced? Use the following data table for your analysis. MARR Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...
Transcribed Image Text:
Challenger Market O&M Defender Market O&M Value Costs Year Value Costs 0 $42,500 1 31,000 $10,000 2 25,000 12,500 $25,000 17,000 $14,000
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