A city water and waste-water department has a four-year-old sludge pump that was initially purchased for $65,000. This pump can be kept in service for an additional four years, or it can be sold for $36,500 and replaced by a new pump. The purchase price of the replacement pump is $48,000. The projected MVs and operating and maintenance costs over the four-year planning horizon are shown in the table that follows. Assuming the MARR is 12%, (a) determine the economic life of the challenger and (b) determine when the defender should be replaced. 工業 Challenger MV at EOY Defender Year MV at EOY O&M Costs O&M Costs $42,000 34,500 27,000 $25,000 $17.500 $12000 21,500 18,000 14,500 2 20,500 15,000 23,500 18,000 4 26,500 19,500 21,000 Click the icon to view the interest and annuity table for discrete compounding when the MARR is 12% per year. a. The economic life of the challenger is year(s). (Round to the nearest whole number.)

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question
A city water and waste-water department has a four-year-old sludge pump that was initially purchased for $65,000. This pump can be kept in service for an additional four years, or it can be sold for $36,500 and
replaced by a new pump. The purchase price of the replacement pump is $48,000. The projected MVs and operating and maintenance costs over the four-year planning horizon are shown in the table that follows.
Assuming the MARR is 12%, (a) determine the economic life of the challenger and (b) determine when the defender should be replaced.
Defender
Challenger
Year
MV at EOY
O&M Costs
MV at EOY
O&M Costs
1
$25,000
$17,500
$42,000
$12000
15,000
18,000
21,000
2
21,500
18,000
14,500
20,500
23,500
34,500
27,000
19,500
3
4
26,500
Click the icon to view the interest and annuity table for discrete compounding when the MARR is 12% per year.
...
a. The economic life of the challenger is
year(s). (Round to the nearest whole number.)
Transcribed Image Text:A city water and waste-water department has a four-year-old sludge pump that was initially purchased for $65,000. This pump can be kept in service for an additional four years, or it can be sold for $36,500 and replaced by a new pump. The purchase price of the replacement pump is $48,000. The projected MVs and operating and maintenance costs over the four-year planning horizon are shown in the table that follows. Assuming the MARR is 12%, (a) determine the economic life of the challenger and (b) determine when the defender should be replaced. Defender Challenger Year MV at EOY O&M Costs MV at EOY O&M Costs 1 $25,000 $17,500 $42,000 $12000 15,000 18,000 21,000 2 21,500 18,000 14,500 20,500 23,500 34,500 27,000 19,500 3 4 26,500 Click the icon to view the interest and annuity table for discrete compounding when the MARR is 12% per year. ... a. The economic life of the challenger is year(s). (Round to the nearest whole number.)
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 3 images

Blurred answer
Knowledge Booster
Assets
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
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