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 Original purchase price, $ Current market value, $ Remaining life, years Estimated value in 5 years, $ Salvage value after 15 years, $ AOC, $ per year Current -30,000 15,000 5 7,000 -- -11,000 The AW of the defender is $- challenger is $- Wilma ((Click to select) correct. Proposed -40,000 15 10,000 5,000 -3,000 and the AW of the

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 Original purchase price, $ Current market value, $ Remaining life, years Estimated value in 5 years, $ Salvage value after 15 years, $ AOC, $ per year Current -30,000 15,000 5 7,000 -- -11,000 The AW of the defender is $- challenger is $- Wilma ((Click to select) correct. Proposed -40,000 15 10,000 5,000 -3,000 and the AW of the

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

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
Original purchase price, $
Current market value, $
Remaining life, years
Estimated value in 5 years, $
Salvage value after 15 years, $
AOC, $ per year
Current
-30,000
15,000
5
7,000
-11,000
The AW of the defender is $-
challenger is $-
Wilma ((Click to select)) correct.
Proposed
-40,000
--
15
10,000
5,000
-3,000
and the AW of the

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Step 1: Calculate Annual Cash Flows (AOC) for Each Option

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Step 2: Calculate Net Annual Cash Flow (NAOC) for Each Option

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Step 3: Perform Annual Worth Calculation

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Step 4: Compare AWs and Make a Decision

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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, $ Current market value, $ -30,000 -42,000 15,000 Remaining life, years 5 15 Estimated value in 5 years, $ 7,000 10,000 5,000 -3,000 Salvage value after 15 years, $ AOC, $ per year The AW of the defender is $- Wilma (Click to select) correct. -14,000 and the AW of the challenger is $-
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