An existing robot can be kept if $2,000 is spent now to upgrade it for future service requirements. Alternatively, the company can purchase a new robot to replace the old robot. The following estimates have been developed for both the defender and the challenger. The company's before-tax MARR is 15% per year. Based on this information, should the existing robot be replaced right now? Assume the robot will be needed for an indefinite period of time. Defender Challenger Current MV $37,000 Purchase price $55,000 Required upgrade $2,000 Installation cost $6,000 Annual expenses $1,600 Annual expenses $1,100 Remaining useful life 5 years Useful life 9 years MV at end of useful life −$1,600 MV at end of useful life $6000 The AW value of the defender is The AW value of the challenger is
An existing robot can be kept if $2,000 is spent now to upgrade it for future service requirements. Alternatively, the company can purchase a new robot to replace the old robot. The following estimates have been developed for both the defender and the challenger. The company's before-tax MARR is 15% per year. Based on this information, should the existing robot be replaced right now? Assume the robot will be needed for an indefinite period of time.
|
Defender |
Challenger |
||||
|---|---|---|---|---|---|
|
Current MV |
$37,000 |
Purchase price |
$55,000 |
||
|
Required upgrade |
$2,000 |
Installation cost |
$6,000 |
||
|
Annual expenses |
$1,600 |
Annual expenses |
$1,100 |
||
|
Remaining useful life |
5 years |
Useful life |
9 years |
||
|
MV at end of useful life |
−$1,600 |
MV at end of useful life |
$6000 |
The AW value of the defender is
The AW value of the challenger is
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 2 images
