• Defender:
  • Current salvage value = $8,000, decreasing at an annual rate of 1000$ from the previous years value
  • Required overhaul = $1,500
  • O&M = $2,000 in year 1, increasing by 30% per year
• Challenger:
  • N_C*=5
  • AEC_C*= 5500
• MARR=10%

The PV of the optimal indefinite plan is within $50 of which of the following?

Hint: this is a multi-step problem. To solve this, first you need to figure the AEC_D* and then you need to do marginal analysis to figure out the optimal amount of time to keep the defender. Once youve done that, chart out the indefinite plan in a cash-flow diagram, and then find its PV. Have fun!

	53,272.25
	53,372.25
	53,472.25
	53,572.25
	None of the above