A breakfast cereal company changed its packaging lines 4 years ago, however, a new opportunity to change to more efficient lines presents itself. The company analyzes whether it is convenient to change the packaging lines before the end of the estimated useful life of the current lines, which should continue to function for another 4 years, or if the previous change is convenient, if the change is better this year or in which of the following years before the end of the useful life would be more convenient. The cost of the proposed new line is $2,200,000.00 with an annual operating cost of $45,000.00, an operating life of 10 years, and an end-of-life salvage of $350,000.00 Perform a replacement analysis with i =25% for a typical defending and challenging pack line with estimated defending line costs shown.

VALUE BEGGINING OF THE YEAR ANUAL COST OF OPPERATION NEXT YEAR 1,200,000 60,000 SUBSEQUENT YEAR 1,000,000 70,000 SUBSEQUENT YEAR 600,000 85,000 LAST YEAR 200,000 85,000 SALVAGE VALUE AT 4 YEARS 0