A water pump was purchased by a mining company in the year 2006. Because of increasing maintenance costs for this pump, a new pump is being considered. The cost data of the defender (present pump) and the challenger (new pump) are given below:

Suppose a $10,000 MV is available now for the defender. Perform a before-tax analysis using a before-tax MARR of 10%, to determine which alternative to select. Be sure to state all important assumptions you make, and utilize a uniform gradient in your analysis of the defender.

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Defender Challenger Original cost $20,000 Purchase cost $30,000 Maintenance c Maintenance cost S400 per year ost- $1,000 in year one (four years ago) increasing by a uniform gradient of $200 per year thereafter MV at the end of MV at the end of life is $6,000 life is zero Original estimated Estimated life 6 years life 10 years