Four years ago, the Attaboy Lawn Mower Company purchased a piece of equipment. Because of increasing maintenance costs for this equipment, a new piece of machinery is being considered for the assembly line. The cost characteristics of the defender (present equipment) and the challenger are shown below:

Suppose a $6,000 MV is available now for the defender. Perform a before-tax analysis, using a before-tax MARR of 15%, 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 = $9,000 Maintenance = $500 in year one (four years ago) increasing by a uniform gradient of $100 per year thereafter Purchase cost = $11,000 Maintenance = $150 per year MV at end of life = 0 MV at end of life = $3,000 Estimated life = five Original estimated life = nine years years