A furniture company intends to evaluate whether they want to stick with thequipment (defender) or replace them with the new productive equipment(challenger). The details of the cost required are shown in Table Q3(b) below. Usean interest rate of 20% per year.ItemsInitial cost eight (8) years ago (RM)Market value (RM)Yearly handling cost (RM)Life time (year)Salvage value (RM)DefenderChallenger450,00025,000700,000160,00070,00051050,000Use the replacement analysis to justify whether the existing equipment isrequired to be replaced with the new equipment.(ii)If the existing equipment (defender) could be sold in international market,determine how much is the minimum value of the defender so that thechallenger could replace the defender now?

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Use the replacement analysis to justify whether the existing equipment is required to be replaced with the new equipment. If the existing equipment (defender) could be sold in international market, determine how much is the minimum value of the defender so that the challenger could replace the defender now?

Use the replacement analysis to justify whether the existing equipment is required to be replaced with the new equipment. If the existing equipment (defender) could be sold in international market, determine how much is the minimum value of the defender so that the challenger could replace the defender now?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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