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Jsing Replacement Study, select: A Keep the defender for 2 years and then replace it with the challenger for 1 year B Keep the defender for 1 years and then replace it with the challenger for 2 years Replace now with challenger for all 3 years

Jsing Replacement Study, select: A Keep the defender for 2 years and then replace it with the challenger for 1 year B Keep the defender for 1 years and then replace it with the challenger for 2 years Replace now with challenger for all 3 years

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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3 Help me answer the given question. Do not round off answer when solving, instead just the final answer will be rounded off.

Searching for ways to cut costs and increase profit, one of the industrial engineers at Home Comfort Furniture Manufacturers, Inc. determined that the equivalent annual worth of an existing machine over its remaining useful life of 2 years is $-74,000 per year. The IE also determined that used machines like the one currently in use are not available any longer, but the defender can be replaced with a challenger that is more advanced. It will have an AW of $-79,550 if it is kept for 2 years or less, $-74,575 if it is kept between 3 and 4 years, and $-65,000 if it is kept for 5 to 10 years. If the company uses a specified 3-year planning horizon and an interest rate of 11% per year. Using Replacement Study, select: A Keep the defender for 2 years and then replace it with the challenger for 1 year B) Keep the defender for 1 years and then replace it with the challenger for 2 years Replace now with challenger for all 3 years
Transcribed Image Text:Searching for ways to cut costs and increase profit, one of the industrial engineers at Home Comfort Furniture Manufacturers, Inc. determined that the equivalent annual worth of an existing machine over its remaining useful life of 2 years is $-74,000 per year. The IE also determined that used machines like the one currently in use are not available any longer, but the defender can be replaced with a challenger that is more advanced. It will have an AW of $-79,550 if it is kept for 2 years or less, $-74,575 if it is kept between 3 and 4 years, and $-65,000 if it is kept for 5 to 10 years. If the company uses a specified 3-year planning horizon and an interest rate of 11% per year. Using Replacement Study, select: A Keep the defender for 2 years and then replace it with the challenger for 1 year B) Keep the defender for 1 years and then replace it with the challenger for 2 years Replace now with challenger for all 3 years
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