9-8. A city water and waste-water department has a four-year-old sludge pump that was initially purchased for $65,000. This pump can be kept in service for an additional four years, or it can be sold for $35,000 and replaced by a new pump. The purchase price of the replacement pump is $50,000. The projected MVs and operating and maintenance costs over the four-year planning horizon are shown in the table that follows.

Assuming the MARR is 10%,

(a) determine the economic life of the challenger and

(b) determine when the defender should be replaced. (9.5, 9.6)

Defender Challenger MV at O&M MV at O&M Year EOY Cost EOY Cost 1 $25,000 $18,500 $40,000 $13,000 2 21,000 21,000 32,000 15,500 3 17,000 23,500 24,000 18,000 4 13,000 26,000 16,000 20,500