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
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 |
−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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