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 challenger. The company?s before-tax MARR is 20% 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. (Hint: Use the AW method)

ENGR.ECONOMIC ANALYSIS
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Chapter1: Making Economics Decisions
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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 challenger.

 

The company?s before-tax MARR is 20% 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. (Hint: Use the AW method)

 
 
 

 

Defender
Current MV
Required Upgrade
Annual Expenses
Remaining Useful Life
MV at the end of Useful Life
$38,000
$2,000
$1,400
6 years
-$1,500
Challenger
Purchase Price
Installation Cost
Annual Expenses
Useful Life
MV at the end of Useful Life
$51,000
$5,500
$1,000
10 years
$7,000
Transcribed Image Text:Defender Current MV Required Upgrade Annual Expenses Remaining Useful Life MV at the end of Useful Life $38,000 $2,000 $1,400 6 years -$1,500 Challenger Purchase Price Installation Cost Annual Expenses Useful Life MV at the end of Useful Life $51,000 $5,500 $1,000 10 years $7,000
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