Question
A city water water-waste department has a four-year-old sludge pump that was initially purchased for $65,000. This pump can be kept in service for an
A city water water-waste 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 with a new pump. The 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
b) Determine when the defender should be replaced
| year | Defender | Challenger | ||
| MV at EOY | O&M cost | MV at EOY | O&M 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 |
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