A mechanical engineer designs and sells equipment that automates manual labor processes. He is offering a machine/robot combination that will significantly reduce labor costs associated with manufacturing garage-door opener transmitters. The equipment has a first cost of $154,000, an estimated annual operating cost of $55,000, a maximum useful life of 5 years, and a $19,500 salvage value anytime it is replaced. The existing equipment was purchased 12 years ago for $65,000 and has an annual operating cost of $78,000. The currently owned equipment can be used for 2 more years after which it will be auctioned off for an expected amount of $6,500, less 38% paid to the company handling the auction. The same scenario will occur if the currently owned equipment is replaced at present. Determine the defender and challenger estimates of P, n, S, and AOC in conducting a replacement analysis today at an interest rate of 20% per year. The Pvalue for defender is $ The n value for defender is The S value for defender is $ The AOC value for defender is $ The Pvalue for challenger is $ The n value for challenger is The S value for challenger is $ The AOC value for challenger is $ years. years.

A mechanical engineer designs and sells equipment that automates manual labor processes. He is offering a machine/robot combination that will significantly reduce labor costs associated with manufacturing garage-door opener transmitters. The equipment has a first cost of $154,000, an estimated annual operating cost of $55,000, a maximum useful life of 5 years, and a $19,500 salvage value anytime it is replaced. The existing equipment was purchased 12 years ago for $65,000 and has an annual operating cost of $78,000. The currently owned equipment can be used for 2 more years after which it will be auctioned off for an expected amount of $6,500, less 38% paid to the company handling the auction. The same scenario will occur if the currently owned equipment is replaced at present. Determine the defender and challenger estimates of P, n, S, and AOC in conducting a replacement analysis today at an interest rate of 20% per year. The Pvalue for defender is $ The n value for defender is The S value for defender is $ The AOC value for defender is $ The Pvalue for challenger is $ The n value for challenger is The S value for challenger is $ The AOC value for challenger is $ years. years.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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If a replacement study is performed and the defender is selected for retention for nD years, explain what should be done 1 year later if a new challenger is identified.
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