You are considering replacing the local area network (LAN) for your small business. A state-of-the-art network...

 

Transcribed Image Text:

You are considering replacing the local area network (LAN) for your small business. A state-of-the-art network (sold by SuperPC Inc.) will cost $50 000 for equipment and installation. You also believe that the system has a useful life of 7 years after which time the technology will be obsolete. You remember from your engineering economics course, however, that it is not always economical to retain assets for their full service-life. If you sell the parts of the network before they become unusable, you can receive the salvage values indicated in the table below. The network company is also offering a total maintenance solution. This maintenance contract will cost $4,000 the first year and increasing by $3,000 per year as indicated below. Your initial analysis has indicated that the maintenance contract is considerably cheaper than trying to hire your own service technicians. Your MARR is 10%. Year Maintenance Costs ($) Salvage value ($) 33,334 1 4,000 2 22,222 7,000 3 12,814 10,000 4 9,876 13,000 5 6,584 16,000 6 19,000 4,390 0 7 22,000 Do not take short-cuts with this question if you want full marks. A. What is the EAC minimum and what is the economic life of the state-of-the-art network? B. Your current LAN has annual costs associated which are outlined in the table below. Using this information, determine if and when your current LAN should be replaced with a new state of the art one assuming the purchase price and maintenance costs show in Table 1 will not change over the next few years. Year Total EAC 1 $20,780 2 $21,800 3 $23,250 You are considering replacing the local area network (LAN) for your small business. A state-of-the-art network (sold by SuperPC Inc.) will cost $50 000 for equipment and installation. You also believe that the system has a useful life of 7 years after which time the technology will be obsolete. You remember from your engineering economics course, however, that it is not always economical to retain assets for their full service-life. If you sell the parts of the network before they become unusable, you can receive the salvage values indicated in the table below. The network company is also offering a total maintenance solution. This maintenance contract will cost $4,000 the first year and increasing by $3,000 per year as indicated below. Your initial analysis has indicated that the maintenance contract is considerably cheaper than trying to hire your own service technicians. Your MARR is 10%. Year Maintenance Costs ($) Salvage value ($) 33,334 1 4,000 2 22,222 7,000 3 12,814 10,000 4 9,876 13,000 5 6,584 16,000 6 19,000 4,390 0 7 22,000 Do not take short-cuts with this question if you want full marks. A. What is the EAC minimum and what is the economic life of the state-of-the-art network? B. Your current LAN has annual costs associated which are outlined in the table below. Using this information, determine if and when your current LAN should be replaced with a new state of the art one assuming the purchase price and maintenance costs show in Table 1 will not change over the next few years. Year Total EAC 1 $20,780 2 $21,800 3 $23,250

Answer rating: 100% (QA)

Equivalent annual cost is continuing to down till the 7 Th year in available data which is the 1345767 thats so economic life of the assets is the sev... View the full answer