A mechanical engineer who designs and sells equipment that automates manual labor processes 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 $170,000, an estimated annual operating cost of $54,000, a maximum useful life of 5 years, and a $20,000 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. At most, the currently owned equipment can be used 2 more years, at which time it will be auctioned off for an expected amount of $6000, less 33% paid to the company handling the auction. The same scenario will occur if the currently owned equipment is replaced now. 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.
A mechanical engineer who designs and sells
equipment that automates manual labor processes 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 $170,000, an estimated
annual operating cost of $54,000, a maximum useful
life of 5 years, and a $20,000 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. At most, the currently
owned equipment can be used 2 more years, at
which time it will be auctioned off for an expected
amount of $6000, less 33% paid to the company
handling the auction. The same scenario will occur
if the currently owned equipment is replaced now.
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.
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