Use the following information. Defender: Current salvage value = $8,000, decreasing at an annual rate of 1000$ from the previous year’s value Required overhaul = $1,500 O&M = $2,000 in year 1, increasing by 30% per year Challenger: NC*=5 AECC*= 5500 MARR=10% Find the loss in PV from mistakenly keeping the defender one year longer than is optimal. So in other words, if you found that the optimal indefinite plan was (j0,1),(j,5)inf , then find the PV difference between that and the plan (j0,2),(j,5)inf. The PV difference is within $10 of:     269.11   289.11   309.11   329.11   None of the above

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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Use the following information.

  • Defender:
    • Current salvage value = $8,000, decreasing at an annual rate of 1000$ from the previous year’s value
    • Required overhaul = $1,500
    • O&M = $2,000 in year 1, increasing by 30% per year
  • Challenger:
    • NC*=5
    • AECC*= 5500
  • MARR=10%

Find the loss in PV from mistakenly keeping the defender one year longer than is optimal. So in other words, if you found that the optimal indefinite plan was (j0,1),(j,5)inf , then find the PV difference between that and the plan (j0,2),(j,5)inf. The PV difference is within $10 of:

 
 

269.11

 

289.11

 

309.11

 

329.11

 

None of the above

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