Alpha software is considering replacing one of their computer servers with a newer model, the current model in question is now worth $1,100,000 (future market values is forecasted to drop by 20% per year). If kept the current server system will require an immediate overhaul that costs $200,000. The operation cost of this server is $170,000 for the first year and will increase by 33% afterwards.

A new server model is available which has a 10 years of service life, costs $2,500,000 with O&M costs of $120,000 for the 1st year which increases by 32% for subsequent years. The new servers (challengers) market value will drop 25% per year through its service life.

Knowing that the companys MARR is 20%

A] Plot total AE cost (uniform annual equivalent cost) vs useful life for the defender as well as the challenger up to 10 years.

B] Find the economic lives of the defender & the challenger.

C]Determine if/when the defender should be replaced within 10 years.