Harry, owner of an automobile battery distributorship in Atlanta, Georgia, performed an economic analysis 3 years ago when he decided to place surge protectors in-line for all is major pieces of testing equipment. The estimates used and the annual worth analysis at MARR = 15% are summarized below. Two different manufacturers’ protectors were compared.

The spreadsheet in Figure is the one Harry used to make the decision. Lloyd’s was the clear choice due to its substantially larger AW value. The Lloyd’s protectors were installed. During a quick review this last year (year 3 of operation), it was obvious that the maintenance costs and repair savings have not followed (and will not follow) the estimates made 3 years ago. In fact, the maintenance contract cost (which includes quarterly inspection) is going from $300 to $1200 per year next year and will then increase 10% per year for the next 10 years. Also, the repair savings for the last 3 years were $35,000, $32,000, and $28,000, as best as Harry can determine. He believes savings will decrease by $2000 per year hereafter. Finally, these 3-year-old protectors are worth nothing on the market now, so the salvage in 7 years is zero, not $3000.

1. Plot a graph of the newly estimated maintenance costs and repair savings projections, assuming the protectors last for 7 more years.
2. With these new estimates, what is the recalculated AW for the Lloyd’s protectors? Use the old first cost and maintenance cost estimates for the first 3 years. If these estimates had been made 3 years ago, would Lloyd’s still have been the economic choice?
3. How has the capital recovery amount changed for the Lloyd’s protectors with these newestimates?

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MARR- 15% PowrUp Investment Annual Ime s Lloyd's Annual RepairInvestment Repair Year and salvage maintenance savings and salvage maintenance savings 26,000 0 36,000 300 -800 25,000 80025,000 35,000 35,000 35,000 35,000 35,000 35,000 35,000 35.000 35,000 35,000 35,000 S 27,675 25,000 -800 300 25,000 25,000 25,000 10 -300 -300 300 -300 300 300 300 -800 -800 126 13 14 15 16 2,000 3,000 17 AW element 18 Total AW 800 25,000 -7025 $ 17,558 -6,642