A replacement analysis is being done for a vacuum seal on a spacecraft. The current seal can be used for 10 more years, or a new one can be purchased and used instead. The new seal would cost $25,000, and there would be an annual $5,000 of maintenance cost. It is estimated the seal could be sold for $7,000 in 10 years. The current seal can be sold now for $9,000 or for $2,000 in 10 years. The required annual maintenance cost is $7,500 Using 10 years for both alternatives and 12% cost of capital, calculate the present worth of both the defender and the challenger and determine whether the seal should be replaced.

Answer rating: 100% (QA)

Present Worth Analysis for Vacuum Seal Replacement Defender Current Seal Initial Cash Flow9000 se... View the full answer