Question
A high-speed electronic assembly machine was purchased two years ago for $50,000. At present time, it can be sold for $25,000 and replaced by a
A high-speed electronic assembly machine was purchased two years ago for $50,000. At present time, it can be sold for $25,000 and replaced by a newer model having a purchase price of $42,500; or it can be kept in service for a maximum of one more year. The new assembly machine, if purchased, has a useful life of not more than two years. The projected resale values and operating and maintenance costs for the challenger and the defender are shown in the accompanying table on a year-by-year basis. If the MARR is 12%, when should the old assembly machine be replaced?
For this problem
a:Develop the cash flow tables for each alternative keep-replace option.
b:set up the cash flow equation for each alternative option.
c:Perform the numerical computations to determine the best option.
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