9-13. Use the PW method to select the better of the following alternatives:

Annual Defender: Challenger:

Expenses Alternative A Alternative B Labor $350,000 $280,000 Material $240,000 $125,000 Insurance and 5% of initial None property taxes capital investment Maintenance $12,000 None Leasing cost None $115,000 Assume that the defender was installed five years ago. The MARR is 8% per year. (9.7)

Definition of alternatives:

A: Retain an already owned machine (defender) in service for 10 more years.

B: Sell the defender and lease a new one (challenger)

for 10 years.

Alternative A (additional information):

Cost of defender five years ago = $500,000 BV now = $111,550 Estimated MV eight years from now = $60,000 Present MV = $180,000