Question
Bruin Manufacturing is evaluating whether it should retain its current environmental test chamber and room or sell it immediately and purchase a new one. The
Bruin Manufacturing is evaluating whether it should retain its current environmental test chamber and room or sell it immediately and purchase a new one. The relevant costs are shown below. The current one can be kept for another 5 years, given that an additional maintenance cost of $750 each year is provided each year. Determine whether the current equipment should be replaced. Use a before-tax MARR of 12% per year and the annual cost method.
Defender Challenger Capital investment, 3 years ago $ 33,000 $ - Capital investment $ $ 38,000 Annual operating expenses $ 5,250 $ 5,450 Annual maintenance $ 750 $ - Current market value $ 13,000 $ - Estimated salvage value at the end of 5 additional years $ 1,500 $ 23,000
What is the challenger's economic life?
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