Question
Solve the following problems on replacement analysis, comparing alternatives and depreciation. Please solve this problem MANUALLY. A high-speed electronic assembly machine was purchased two years
Solve the following problems on replacement analysis, comparing alternatives and depreciation. Please solve this problem MANUALLY.
A high-speed electronic assembly machine was purchased two years ago for ?50,000. At the present time, it
can be sold for ?25,000 and replaced by a newer model having a purchase price of ?42,500; or it can be
kept in service for a maximum of one more year. The new assembly machine, if purchased, has a useful life
of not more than two years. The projected resale values and operating and maintenance costs for the
challenger and the defender are shown in the accompanying table on a year-by-year basis. If the before-tax
MARR is1 5%, when should the old assembly machine be replaced? Use the following data table for your
analysis.
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