Assume that a manufacturing company has equipment (i.e., defender) that was installed 6 years ago for...

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Assume that a manufacturing company has equipment (i.e., defender) that was installed 6 years ago for $150,000 and has a present market value of $50,000 that is expected to decrease $5,000 per year. If the defender is kept one more year, its O&M costs will be $75,000 with increases of $20,000 per year thereafter. The engineering manager of the company is considering installing new equipment (i.e., challenger) at a cost of $200,000. The challenger will have an expected salvage value of $10,000 at the end of its useful life of 10 years. Its annual O&M costs will be $50,000. If MARR is 20%, determine when the defender should be replaced. Assume that the estimates of the installed first cost and salvage value of the challenger are going to remain constant. Assume that a manufacturing company has equipment (i.e., defender) that was installed 6 years ago for $150,000 and has a present market value of $50,000 that is expected to decrease $5,000 per year. If the defender is kept one more year, its O&M costs will be $75,000 with increases of $20,000 per year thereafter. The engineering manager of the company is considering installing new equipment (i.e., challenger) at a cost of $200,000. The challenger will have an expected salvage value of $10,000 at the end of its useful life of 10 years. Its annual O&M costs will be $50,000. If MARR is 20%, determine when the defender should be replaced. Assume that the estimates of the installed first cost and salvage value of the challenger are going to remain constant.

Answer rating: 100% (QA)

Lets break down the costs and benefits for both the defender and the challenger Defender Initial cos... View the full answer