The new president of Sulfuric & Cia, believes that his company should use the finest and most modern laboratory equipment. He has recommended replacing a 2 year old medical equipment. He also believes that he can demonstrate that his proposal is economically advantageous with a 15% annual return over a 5-year planning horizon. a) Perform the replacement analysis for a 5-year period. b) Will the answer be the same as a) if a 15-year planning horizon is used for the replacement analysis? What is the inherent assumption of this analysis for the defender who has only 5 years of additional life?

Buying Cost Current Cost estimated useful life estimated cost, 5 years Salvage value at 15 years Annual operation cost Actual Proposed 30000 40000 15000 5 15 7000 10000 5000 5000 3000 Buying Cost Current Cost estimated useful life estimated cost, 5 years Salvage value at 15 years Annual operation cost Actual Proposed 30000 40000 15000 5 15 7000 10000 5000 5000 3000