Kermit bought a production line 5 years ago for $35,000. At that time it was estimated to have a service life of 10 years and salvage at the end of its service life of $10,000. Kermit's CFO recently proposed to replace the old line with a modern line expected to last 15 years and cost $95,000. This new line will provide $7,000 savings in annual operating and maintenance costs, and have a salvage value of $15,000 at the end of 15 years. The seller of the new line is willing to accept the old line as a trade-in for its current fair market value, which is $12,000. The CFO estimates that if the old line is kept for 5 more years, its salvage value will be $6,000. We are looking at performing a replacement analysis. The defender must be analyzed using a first cost of and a salvage value of for years. The challenger must be analyzed using a first cost of and a salvage value of for years. Enter the answers as 12345. DO NOT enter $ symbol or comma separators. DO NOT enter decimal places.

Kermit bought a production line 5 years ago for $35,000. At that time it was estimated to have a service life of 10 years and salvage at the end of its service life of $10,000. Kermit's CFO recently proposed to replace the old line with a modern line expected to last 15 years and cost $95,000. This new line will provide $7,000 savings in annual operating and maintenance costs, and have a salvage value of $15,000 at the end of 15 years. The seller of the new line is willing to accept the old line as a trade-in for its current fair market value, which is $12,000. The CFO estimates that if the old line is kept for 5 more years, its salvage value will be $6,000. We are looking at performing a replacement analysis. The defender must be analyzed using a first cost of and a salvage value of for years. The challenger must be analyzed using a first cost of and a salvage value of for years. Enter the answers as 12345. DO NOT enter $ symbol or comma separators. DO NOT enter decimal places.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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