Rework Problem 12.20, assuming the following additional information:

• The old switching system has been fully depreciated.
• The new system falls into the five-year MACRS property class.
• The company’s marginal tax rate is 40%, and the firm uses an after-tax MARR of 14%.

Data From Problem 12.20

An auto-part manufacturer is faced with the prospect of replacing its old robot, which has been used in stamping operation for 10 years. This particular robot was installed at a cost of $100,000 and was assumed to have a 15-year life with no appreciable salvage value. The current annual operating costs are $20,000 for this old robot, and these costs are presumed to be the same for the rest of its life. A sales representative from Advanced Robotic Systems is trying to sell this company a new-highly efficient robot. The new system would require an investment of $200,000 for installation. The economic life of this new robot is estimated to be 10 years with a salvage value of $18,000, and the robot will reduce annual operating costs to $5,000. No detailed agreement has been made with the sales representative about the disposal of the old robot. Determine the range of resale values associated with the old system that would justify installation of the new system at a MARR of 14%.