Question
A replacement analysis is being done for a vacuum seal on a spacecraft. The current seal can be used for 10 more years, or a
A replacement analysis is being done for a vacuum seal on a spacecraft. The current seal can be used for 10 more years, or a new one can be purchased and used instead. The new seal would cost $25,000, and there would be an annual $5,000 of maintenance cost. It is estimated the seal could be sold for $7,000 in 10 years. The current seal can be sold now for $9,000 or for $2,000 in 10 years. The required annual maintenance cost is $7,500 Using 10 years for both alternatives and 12% cost of capital, calculate the present worth of both the defender and the challenger and determine whether the seal should be replaced.
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