Concurris Prototyping is committed to using the newest and finest equipment in its labs. Accordingly, Wilma, a senior engineer, has recommended that a 2-year-old piece of precision measurement equipment be replaced immediately. She believes it can be demonstrated that the proposed equipment is economically advantageous at a 15% -per year return and a planning horizon of 5 years. Perform the replacement analysis using the annual worth method, a 5-year study period, and the estimates below. Was Wilma correct? Equipment Proposed Original purchase price, $ Current market value, $ Remaining life, years Current -30,000 -44,000 15,000 5 15 Estimated value in 5 years, $ 7,000 10,000 Salvage value after 15 years, $ AOC, $ per year The AW of the defender is $-1 5,000 -15,000 |-3,000 and the AW of the challenger is $- Wilma is correct.

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question
None
Concurris Prototyping is committed to using the newest and finest equipment in its labs. Accordingly, Wilma, a senior engineer, has
recommended that a 2-year-old piece of precision measurement equipment be replaced immediately. She believes it can be
demonstrated that the proposed equipment is economically advantageous at a 15% -per year return and a planning horizon of 5 years.
Perform the replacement analysis using the annual worth method, a 5-year study period, and the estimates below. Was Wilma correct?
Equipment
Proposed
Original purchase price, $
Current market value, $
Remaining life, years
Current
-30,000
-44,000
15,000
5
15
Estimated value in 5 years, $
7,000
10,000
Salvage value after 15 years, $
AOC, $ per year
The AW of the defender is $-1
5,000
-15,000
|-3,000
and the AW of the challenger is $-
Wilma is
correct.
Transcribed Image Text:Concurris Prototyping is committed to using the newest and finest equipment in its labs. Accordingly, Wilma, a senior engineer, has recommended that a 2-year-old piece of precision measurement equipment be replaced immediately. She believes it can be demonstrated that the proposed equipment is economically advantageous at a 15% -per year return and a planning horizon of 5 years. Perform the replacement analysis using the annual worth method, a 5-year study period, and the estimates below. Was Wilma correct? Equipment Proposed Original purchase price, $ Current market value, $ Remaining life, years Current -30,000 -44,000 15,000 5 15 Estimated value in 5 years, $ 7,000 10,000 Salvage value after 15 years, $ AOC, $ per year The AW of the defender is $-1 5,000 -15,000 |-3,000 and the AW of the challenger is $- Wilma is correct.
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education