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Scenario 1: Four years ago, The Kresser Sdn. Bhd. purchased an Industrial Shredder Machine. Because of increasing maintenance costs for this equipment, a new piece of machine is being considered for the assembly line. The cost characteristics of the defender (present machine) and the challenger are shown in Table 1 below: Table 1 Defender Original cost = RM9,000 Maintenance = RM500 in year one (four years ago) increasing by a uniform gradient of RM100 per year thereafter Market Value (MV) at end of life = 0 Challenger Purchased cost =RM11,000 Maintenance = RM150 per year 2 Market Value (MV) at end of life = RM3,000 Estimated life = 5 years Original estimated life = 9 years Suppose a RM6,000 Market value is available now for the defender. Perform a before- tax analysis, using before-tax MARR of 15%, to determine which alternative to select. Be sure to state all important assumptions you make, and utilize a uniform gradient in your analysis of the defender.

Scenario 1: Four years ago, The Kresser Sdn. Bhd. purchased an Industrial Shredder Machine. Because of increasing maintenance costs for this equipment, a new piece of machine is being considered for the assembly line. The cost characteristics of the defender (present machine) and the challenger are shown in Table 1 below: Table 1 Defender Original cost = RM9,000 Maintenance = RM500 in year one (four years ago) increasing by a uniform gradient of RM100 per year thereafter Market Value (MV) at end of life = 0 Challenger Purchased cost =RM11,000 Maintenance = RM150 per year 2 Market Value (MV) at end of life = RM3,000 Estimated life = 5 years Original estimated life = 9 years Suppose a RM6,000 Market value is available now for the defender. Perform a before- tax analysis, using before-tax MARR of 15%, to determine which alternative to select. Be sure to state all important assumptions you make, and utilize a uniform gradient in your analysis of the defender.

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
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Scenario 1: Four years ago, The Kresser Sdn. Bhd. purchased an Industrial Shredder Machine. Because of increasing maintenance costs for this equipment, a new piece of machine is being considered for the assembly line. The cost characteristics of the defender (present machine) and the challenger are shown in Table 1 below: Table 1 Defender Original cost = RM9,000 Maintenance = RM500 in year one (four years ago) increasing by a uniform gradient of RM100 per year thereafter Market Value (MV) at end of life = 0 Original estimated life = 9 years Challenger Purchased cost =RM11,000 Maintenance = RM150 per year 2 Market Value (MV) at end of life = RM3,000 Estimated life = 5 years Suppose a RM6,000 Market value is available now for the defender. Perform a before- tax analysis, using before-tax MARR of 15%, to determine which alternative to select. Be sure to state all important assumptions you make, and utilize a uniform gradient in your analysis of the defender.
Transcribed Image Text:Scenario 1: Four years ago, The Kresser Sdn. Bhd. purchased an Industrial Shredder Machine. Because of increasing maintenance costs for this equipment, a new piece of machine is being considered for the assembly line. The cost characteristics of the defender (present machine) and the challenger are shown in Table 1 below: Table 1 Defender Original cost = RM9,000 Maintenance = RM500 in year one (four years ago) increasing by a uniform gradient of RM100 per year thereafter Market Value (MV) at end of life = 0 Original estimated life = 9 years Challenger Purchased cost =RM11,000 Maintenance = RM150 per year 2 Market Value (MV) at end of life = RM3,000 Estimated life = 5 years Suppose a RM6,000 Market value is available now for the defender. Perform a before- tax analysis, using before-tax MARR of 15%, to determine which alternative to select. Be sure to state all important assumptions you make, and utilize a uniform gradient in your analysis of the defender.
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