device has been initially purchased for $65,000. It can be kept in service for an additional

four years, or it can be sold for $35,000 and replaced by a new one. The purchase price of

the replacement device is $50,000. The projected MVs and operating and maintenance costs over the four-year planning horizon are shown in Table Q 6(a). Assuming the MARR is10%,

(i)

Determine the economic life of the challenger.

(ii)

Determine when the defender should be replaced

Table Q 6(a) Defender Challenger Year MV at EOY $ O&M Cost ($) MV at EOY ($ O&M Cost 1 25000 18500 40000 13000 2 21000 21000 32000 15500 3 17000 23500 24000 18000 4 13000 26000 16000 20500