Alpha software is considering replacing one of their computer servers with a newer model, the curent model in question is now worth $1,200,000 (fiuture market values is forecasted to drop by 20% per year). If kept the current server system will require an immediate overhaul that costs $200,000. The operation cost of this server is $170,000 for the first year and will increase by 33% afterwards. A new server model is available which has a 10 years of service life, costs $2,500,000 with O&M costs of $120,000 for the 1st year which increases by 32% for subsequent years. The new server's (challenger's) market value will drop 25% per year through its service life. Knowing that the company's MARR is 10% A] Plot total AE cost (uniform annual equivalent cost) vs useful life for the defender as well as the challenger up to 10 years. B] Find the economic lives of the defender & the challenger. C Determine if when the defender should be replaced within 10 years
Alpha software is considering replacing one of their computer servers with a newer model, the curent model in question is now worth $1,200,000 (fiuture market values is
A new server model is available which has a 10 years of service life, costs $2,500,000 with O&M costs of
$120,000 for the 1st year which increases by 32% for subsequent years. The new server's (challenger's)
market value will drop 25% per year through its service life.
Knowing that the company's MARR is 10%
A] Plot total AE cost (uniform annual equivalent cost) vs useful life for the defender as well as the
challenger up to 10 years.
B] Find the economic lives of the defender & the challenger.
C Determine if when the defender should be replaced within 10 years.
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