Data Table Modernize Replace 37,100,000 S7,200,000 years 57,500 Initial investment in 2018 S 63,800,000 S 17,000,000 years 48,000 Terminal disposal value in 2024 Useful life Total annual cash operating cost per prototype chip S A 1 Chips uses straight-line depreciation, assuming zero terminal disposal value. For simplicity, we assume no change in prices or costs in future years. The investment will be made at the beginning of 2018, and all transactions thereafter occur on the last day of the year. A- 1 Chips' required rate of return is 18%. There is no difference between the modernize and replace alternatives in terms of required working capital. A-1 Chips has a special waiver on income taxes until 2024 Print Done