# A piece of equipment that was purchased 2 years ago by Toshiba Imaging for \$50,000 was expected to have a useful life of 5 years with a \$5000 salvage value . Its performance was less than expected, and it was upgraded for \$20,000 one year ago. Increased demand now requires that the equipment be upgraded again for another \$17,000 so

A piece of equipment that was purchased 2 years ago by Toshiba Imaging for \$50,000 was expected to have a useful life of 5 years with a \$5000 salvage value. Its performance was less than expected, and it was upgraded for \$20,000 one year ago. Increased demand now requires that the equipment be upgraded again for another \$17,000 so that it can be used for 3 more years. If upgraded, its annual operating cost will be \$27,000 and it will have a \$12,000 salvage after 3 years. Alternatively, it can be replaced with new equipment priced at \$65,000 with operating costs of \$14,000 per year and a salvage value of \$23,000 after 6 years. If replaced now, the existing equipment will be sold for \$7000. Determine the values of P , S , AOC, and n for the defender in a replacement study.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...