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

Assume that the defender was installed five years ago. And that its MACR(GDS) property class seven years. After tax MARR is 10% per year.Effective income tax 40%.

Definition of alternatives:

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

B: Sell the defender and lease a new one (challenger) for eight years.

Alternative A (additional information): Cost of defender five years ago = $500,000 BV now = $111,550 Estimated MV eight years from now = $50,000 Present MV = $150,000

9-13. Use the PW method to select the better of the following alternatives: Annual Expenses Defender: Alternative A Challenger: Alternative B Labor Material Insurance and property taxes $250,000 100,000 None $300,000 250,000 4% of initial capital investment $8,000 None Maintenance Leasing cost None $100,000 Assume that the defender was installed five years ago. And that its MACR(GDS) property class seven years. After tax MARR is 10% per year. Effective income tax 40%. Definition of alternatives: A: Retain an already owned machine (defender) in service for eight more years. B: Sell the defender and lease a new one (challenger) for eight years. Alternative A (additional information): Cost of defender five years ago = $500,000 BV now = $111,550 Estimated MV eight years from now = $50,000 Present MV = $150,000