PacEx, an express delivery company, is considering replacing one of its package-handling machines with a newer and more efficient one.

The current machine has a remaining useful life of seven years. The current machine has an annual cost for operating and maintenance of $25,000 per year. The salvage value expected from scrapping the old machine at the end of seven years is zero, but the company can sell the machine now to another firm in the industry for $10,000.

The new package-handling machine has a purchase price of $150,000 and an estimated useful life of seven years. It has an estimated salvage value of $30,000 and is expected to realize economic savings

of $15,000 per year from reduced amount of damaged packages. It has annual cost of $10,000 for operating and maintenance. The firm uses a 10% MARR.

Using the CASH FLOW approach,

a.(5 points) Develop a cash flow diagram (or Excel sheet) for the Defender

b.(5 points) Develop a cash flow diagram (or Excel Sheet) for the Challenger

c.(10 points) Find the EUAC of the Defender

d.(10 points) Find the EUAC of the Challenger.

e.(5 points) Which option should PacEx take?

f.(5 points) If the MARR was changed to 15%, which option should be taken? Why?