Question: A company is considering replacing a broken inspection machine, which has been used to test the mechanical strength of electrical insulators, with a newer and






A company is considering replacing a broken inspection machine, which has been used to test the mechanical strength of electrical insulators, with a newer and more efficient one. The company uses an internal rate of return of 9%. The conditions for the replacement analysis are summarized in the following tables. Fill in the missing blanks. \begin{tabular}{|c|c|c|c|c|c|c|} \hline \multicolumn{7}{|c|}{ New Machine } \\ \hline n Investment & \begin{tabular}{c} Salvage \\ Value \end{tabular} & O\&M & CR(9\%) & OC (9%) & AEC (9%) \\ \hline 0 & $10,000 & $6,000 & & & & \\ \hline 1 & & $5,100 & $2,000 & $5,800 & $2,000 & $7,800 \\ \hline 2 & & $4,335 & $2,800 & $3,611 & $2,362 & $5,993 \\ \hline 3 & & $3,685 & $3,600 & $2,826 & $2,754 & $5,580 \\ \hline 4 & & $3,132 & $4,400 & $2,402 & $3,114 & $5,516 \\ \hline 5 & & $2,662 & $5,200 & $2,126 & $3,463 & $5,589 \\ \hline \end{tabular} When considering Marginal Cost Analysis, the graph can be described as: A graph of two consecutive years, showing the opportunity cost, the salvage value and the operating cost of retaining the old machine one more year. A graph of two consecutive years, showing the opportunity cost, the salvage value and the operating cost of acquiring the new machine for one year. A graph of four consecutive years, showing the opportunity cost, the salvage value and the operating cost of acquiring the new machine for ones year. A graph of four consecutive years, showing the opportunity cost, the salvage value and the operating cost of retaining the old machine one more year. The nomenclature of the equation to obtain the marginal AEC for the defender is: Marginal AEC=4,000(A/P,9%,1)+(3,5003,000) Marginal AEC =3,000(P/A,9%,1)+(5,0002,000) Marginal AEC=3,000(A/P,9%,2)+(5,0002,000) Marginal AEC =2,000(A/P,12%,1)+(5,0002,000) The Marginal AEC would be: $4,860 $6,360 $6,250 $400 What would be the conclusion of this marginal analysis? (State when the old machine should be replaced)
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