Five years ago, a company in New Jersey installed a diesel-electric unit costing $50,000 at a remote site because no dependable electric power was available from a public utility. The company has computed depreciation by the straight-line method with a useful life of 10 years and a zero salvage value. Annual operation and maintenance expenses are $18,000,and property taxes and insurance cost another $3000 per year. Dependable electric service is now available at an estimated annual cost of $28,000.

The company in New Jersey wishes to know whether it would be more economical to dispose of thediesel-electric unit now, when it can be sold for $30,000,or to wait five years when the unit would have to be replaced anyway (with no MV). The company has an effective income tax rate of 50% and tries to limit its capital expenditures to opportunities that will earn at least 9% per year after income taxes.

The AW value for the defender is??

The AW value for the challenger is??

The company should sell or keep the diesel electric unit??