6-45. A piece of production equipment is to be replaced immediately because it no longer meets quality requirements for the end product. The two best alternatives are a used piece of equipment (E1) and a new automated model (E2). The economic estimates for each are shown in the accompanying table. Alternative E1 E2 Capital investment $14,000 $65,000 Annual expenses $14,000 $9,000 Useful life (years) 5 20 Market value (at end $8,000 $13,000 of useful life) The MARR is 15% per year.

a. Which alternative is preferred, based on the repeatability assumption? (6.5)

b. Show, for the coterminated assumption with a five-year study period and an imputed market value for Alternative B, that the AW of B remains the same as it was in Part (a). [And obviously, the selection is the same as in Part (a).] Explain why that occurs in this problem. (6.5)