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Question 1 You have been hired to perform a challenger-defender analysis for Tasty Pizza Company, which is considering whether their existing pizza oven should be
Question 1 You have been hired to perform a challenger-defender analysis for Tasty Pizza Company, which is considering whether their existing pizza oven should be replaced or not. Your analysis has uncovered the following data: Existing pizza oven (Defender): Useful life MARR 9 years 10% per annum Purchase cost 5 years ago $17,000 Market value (current) Market value (end of useful life) $750 $200 Annual maintenance $3,250 Annual parts replacement $1,750 Annual Insurance 2% of purchase cost Replacement pizza oven (Challenger): 9 years Useful life MARR 10% per annum Purchase cost (current) $16,000 Market value (end of useful life) 20% of purchase cost Annual maintenance $3,000 Annual Insurance 2% of purchase cost (a) Employ EUAC analysis and calculate the annual cost of keeping the defender. (10 marks) (b) Use EUAC analysis and calculate the annual cost of purchasing the challenger. (10 marks) (c) Identify whether the defender be kept or the challenger be purchased. Discuss your decision criterion
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