A mechanical engineer designs and sells equipment that automates manual labor processes. He 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 $178,000, an estimated annual operating cost of $53,000, a maximum useful life of 5 years, and a $19,000 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. The currently owned equipment can be used for 2 more years after which it will be auctioned off for an expected amount of $4,750, less 20% paid to the company handling the auction. The same scenario will occur if the currently owned equipment is replaced at present. 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 designs and sells equipment that automates manual labor processes. He 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 $178,000, an estimated annual operating cost of $53,000, a maximum useful life of 5 years, and a $19,000 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. The currently owned equipment can be used for 2 more years after which it will be auctioned off for an expected amount of $4,750, less 20% paid to the company handling the auction. The same scenario will occur if the currently owned equipment is replaced at present. 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.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:A mechanical engineer designs and sells equipment that automates manual labor processes. He 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 $178,000, an estimated annual operating cost of $53,000, a maximum useful life of 5 years, and a $19,000 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. The currently owned equipment can be used for 2 more years after which it will be auctioned off for an expected amount of
$4,750, less 20% paid to the company handling the auction. The same scenario will occur if the currently owned equipment is replaced
at present. 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.
The Pvalue for defender is $
The n value for defender is
The Svalue for defender is $|
The AOC value for defender is $
years.
The Pvalue for challenger is $ |
The n value for challenger is
The S value for challenger is $
The AOC value for challenger is $ |
years.
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