Concurris Prototyping is committed to using the newest and finest equipment in its labs. Accordingly, Wilma, a senior engineer, has recommended that a 2-year-old piece of precision measurement equipment be replaced immediately. She believes it can be demonstrated that the proposed equipment is economically advantageous at a 15%-per year return and a planning horizon of 5 years. Perform the replacement analysis using the annual worth method, a 5-year study period, and the estimates below. Was Wilma correct?EquipmentCurrentProposedOriginal purchase price, $−30,000−36,000Current market value, $15,000--Remaining life, years515Estimated value in 5 years, $7,00010,000Salvage value after 15 years, $--5,000AOC, $ per year−7,000−3,000 The AW of the defender is $− and the AW of the challenger is $− . Wilma (Click to select) is is not correct.

The annual worth is the net of the relative multitude of benefits and costs caused more than a…

Answered: Concurris Prototyping is committed to…

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 6E

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Concurris Prototyping is committed to using the newest and finest equipment in its labs. Accordingly, Wilma, a senior engineer, has recommended that a 2-year-old piece of precision measurement equipment be replaced immediately. She believes it can be demonstrated that the proposed equipment is economically advantageous at a 15%-per year return and a planning horizon of 5 years. Perform the replacement analysis using the annual worth method, a 5-year study period, and the estimates below. Was Wilma correct?

Equipment	Current	Proposed
Original purchase price, $	−30,000	−36,000
Current market value, $	15,000	--
Remaining life, years	5	15
Estimated value in 5 years, $	7,000	10,000
Salvage value after 15 years, $	--	5,000
AOC, $ per year	−7,000	−3,000

The AW of the defender is $− and the AW of the challenger is $− .

Wilma (Click to select) is is not correct.

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