The AW values for retaining a presently owned machine for additional years are shown in the table. Note that the values represent the AW amount for each of the n years that the asset is kept, i.e., if it is kept 5 more years, the annual worth is $−95,000 for each of the 5 years. Assume that future costs remain as estimated for the replacement study and that used machines like the one presently owned will always be available.(a) What is the ESL and associated AW of the defender at a MARR of 12% per year?(b) A challenger with an ESL of 7 years and an AWC = $-90,000 per year has been identified. Which AW will be less for the respective ESL periods? Retention Period, YearsAW Value, $ per Year1-89,0002-95,0003-86,0004-85,0005-95,000a) The ESL of the defender is ____year(s) with the lowest AW of $_____.b) The (Click to select defender challenger) has the lower AW at $______for n equal to ____ .

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ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The AW values for retaining a presently owned machine for additional years are shown in the table. Note that the values represent the AW amount for each of the n years that the asset is kept, i.e., if it is kept 5 more years, the annual worth is $−95,000 for each of the 5 years. Assume that future costs remain as estimated for the replacement study and that used machines like the one presently owned will always be available.

(a) What is the ESL and associated AW of the defender at a MARR of 12% per year?

(b) A challenger with an ESL of 7 years and an AWC = $-90,000 per year has been identified. Which AW will be less for the respective ESL periods?

Retention Period, Years	AW Value, $ per Year
1	-89,000
2	-95,000
3	-86,000
4	-85,000
5	-95,000

a) The ESL of the defender is ____year(s) with the lowest AW of $_____.
b) The (Click to select defender challenger) has the lower AW at $______for n equal to ____ .

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