5. A specialty concrete mixer used in construction was purchased for

$300,000 7 years ago. Its annual O&M costs are $105,000. At the end of the 8-year planning horizon, the mixer will have a salvage value of $5,000.

If the mixer is replaced, a new mixer will require an initial investment of

$375,000 and at the end of the 8-year planning horizon, the new mixer will have a salvage value of $45,000. Its annual O&M cost will be only $40,000 due to newer technology. Analyze this using an EUAC measure and a MARR of 15% to see if the concrete mixer should be replaced if the old mixer is sold for its market value of $65,000.

a. Use the cash fl ow approach (insider’s viewpoint approach).

b. Use the opportunity cost approach (outsider’s viewpoint approach).