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.
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.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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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.
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