Based on company records of similar equipment, a consulting aerospace engineer at Aerospatiale estimated AW values for

Question:

Based on company records of similar equipment, a consulting aerospace engineer at Aerospatiale estimated AW values for a presently owned, highly accurate steel rivet inserter.
If Retained This AW Value,
Number of Years $ per Year
1............. –62,000
2............. –51,000
3............. –49,000
4............. –53,000
5............. –70,000
A challenger has ESL = 2 years and AW C = $–48,000 per year.
(a) If the consultant must recommend a replace–retain decision today, should the company keep the defender or purchase the challenger? Why? The is 15% per year.
(b) When should the next replacement evaluation take place?

MARR
Minimum Acceptable Rate of Return (MARR), or hurdle rate is the minimum rate of return on a project a manager or company is willing to accept before starting a project, given its risk and the opportunity cost of forgoing other...