One of the four ovens at a bakery is being considered for replacement. Its salvage value and maintenance costs are given in the table below for several years. A new oven costs $80,000 and this price includes a complete guarantee of the maintenance costs for the first two years, and it covers a good proportion of the maintenance costs for years 3 and 4. The salvage value and maintenance costs are also summarized in the table below

a.Estimate the ESL for each of the ovens (old and new) if the MARR equals 10%?

b.What is the minimum AW cost for each of the ovens (old and new) ?

c.Should the old oven be replaced this year ?

Old Over Salvage Value Maintenance New Oven Salvage Value Maintenance at End of Year $20,000 17,000 14,000 11,000 7,000 Year Costs at End of Year $80,000 75,000 70,000 66,000 62,000 Costs 9,500 9,600 9,700 9,800 2 1,000 3,000 4