ix.

A company is thinking in replacing an existing machine. The old machine it is expected to last for another four (4) years and has a market value of $3,000. Operating estimated costs are $2,000 each year. The new machine or challenger has a cost of $15,000, operating cost of $1,000 and an expected life of 10 years. The salvage value of the new machine is $5,000. Should be replaced, with an interest rate of 10%?

 

	a.	Replace, the challenger is -$2946.41
	b.	Do not replace, the defender is -$3127.50
	c.	Replace, the defender is -$2946.41
	d.	Do not replace, the defender is -$2946.41