7 A defender was installed 10 years ago at a capital investment cost of $65,000. It presently has a market value of $14,000. If kept, the defender has an economic life of three years, operating expenses of $15,000 per year, and a market value of$9,000 at the end of year (EOY) three. The defender is being depreciated by the straight line method using a 15-year write-off period with an estimated salvage value for depreciation purposes of $10,000.As an alternative, the defender can be replaced with a challenger which will cost $70,000 to install, have operating expenses of $9,500 per year, and have a final market value of $12,000 at the end of its 20-year economic life. If the replacementis made, the challenger will be depreciated with the straight line method over a 20-year life with an estimated salvage value of $12,000 at EOY 20. Such equipment (defender or challenger) will be needed indefinitely. If the after-tax MARR is 10%per year and the effective income tax rate is 25%, should the defender or the challenger be recommended?Click the icon to view the interest and annuity table for discrete compounding when MARR = 10% per year....The AW value for the defender is $ - 14,055'. (Round to the nearest dollar.)The AW value for the challenger is $ - 14,415. (Round to the nearest dollar.)The defender should be kept for at least one more year

Given, Defender Challenger Initial cost 65000 70000 Operational cost 15000 9500 Market…

ade, the challenger will be depreciated with the straight line method over a 20-year life with an estimated salvage value of $12,000 at EOY 20. Such equipment (defender or challenger) w ear and the effective income tax rate is 25%, should the defender or the challenger be recommended? Click the icon to view the interest and annuity table for discrete compounding when MARR = 10% per year. AW value for the defender is $ - 14,055'. (Round to the nearest dollar.)

ade, the challenger will be depreciated with the straight line method over a 20-year life with an estimated salvage value of $12,000 at EOY 20. Such equipment (defender or challenger) w ear and the effective income tax rate is 25%, should the defender or the challenger be recommended? Click the icon to view the interest and annuity table for discrete compounding when MARR = 10% per year. AW value for the defender is $ - 14,055'. (Round to the nearest dollar.)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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