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Question 5: [20pts] SMART Robotix is planning to replace its old switchboard system, which has been used in the company's HQ for 10 years. This
Question 5: [20pts] SMART Robotix is planning to replace its old switchboard system, which has been used in the company's HQ for 10 years. This particular system, which has a current market value of P, was installed for $100,000 and presumed a 15-year service life, with no appreciable salvage value. Currently, the machine is costing the company $20,000 a year, and these costs are presumed to be the same for the rest of its life. SwitchT is proposing the company a new computerized switching system which would require an investment of $200,000 for installation. The computerized system is expected to have an economic life of 10 years, and a salvage value of $18,000. One of the benefits of this new system is the reduction of operating cost to $5,000 per annum. No detailed agreement has been made with the sales representative about the disposal of the old system. Determine the range of resale values associated with the old system that would justify installation of the new system at a MARR of 14%. Hint: use Annual Equivalent Analysis. Question 5: [20pts] SMART Robotix is planning to replace its old switchboard system, which has been used in the company's HQ for 10 years. This particular system, which has a current market value of P, was installed for $100,000 and presumed a 15-year service life, with no appreciable salvage value. Currently, the machine is costing the company $20,000 a year, and these costs are presumed to be the same for the rest of its life. SwitchT is proposing the company a new computerized switching system which would require an investment of $200,000 for installation. The computerized system is expected to have an economic life of 10 years, and a salvage value of $18,000. One of the benefits of this new system is the reduction of operating cost to $5,000 per annum. No detailed agreement has been made with the sales representative about the disposal of the old system. Determine the range of resale values associated with the old system that would justify installation of the new system at a MARR of 14%. Hint: use Annual Equivalent Analysis
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