4. 9.24 ABB Communications is considering replacing equipment that had a first cost of $300,000 five years ago. The company CEO wants to know if the equipment should be replaced now or at any other time over the next 3 years to minimize the cost of producing miniature background suppression sensors. Since the present equipment or the proposed equipment can be used for any or all of the 3-year period, one of the company’s industrial engineers produced AW cost information for the defender and challenger as shown below. The values represent the annual costs of the respective equipment if used for the indicated number of years. Use

(a) a spreadsheet and

(b) factors to determine when the defender should be replaced to minimize the cost to ABB for the 3-year study period using an interest rate of 10% per year. Table Summary: A table divided into 2 main columns shows a replacement analysis for a 3-year period. The column headers are given as: Column 1, If retained this number of years; and Column 2, the AW in dollars per year is. Column 2 is further divided into two parts: Defender and Challenger.

If Retained ThisNumber of Years The AW in $ per Year Is: Defender Challenger 1 −22,000 −29,000 2 −24,000 −26,000 3 −27,000 −25,000