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Part A: An engineer estimated the equivalent annual costs of a currently installed machine and a new machine to replace it as follows: Years Retained
Part A: An engineer estimated the equivalent annual costs of a currently installed machine and a new machine to replace it as follows: Years Retained Defender EAC Challenger EAC 1 145,000 136,000 2 96,430 126,000 63,317 92.000 39,321 53,000 5 49,570 38,000 3 4 a) Determine the economic service lives of the defender and challenger. b) What should be the replacement decision? Decision 1: Replace the Defender Now Decision 2: Retain the Defender till the end of its useful life Decision 3: Retain the Defender for one more year then re-do the replacement analysis then? Please justify to receive the full point. c) The defender was bought three years ago for $350,000. The current value of that machine is $150,000. The market value of the machine after 1 year is going to be $100,000. The operation cost of this machine at year 1 (from now not from the date of purchase) is $75,000. The interest rate is 20%. Based on this was the engineer's calculation of the red number in the table correct? If no, then what should be the correct number? Part B (separate from part A): An injection molding system has a first cost of $180,000, and an annual operating cost of $84,000 in year 1, increasing by $5000 per year thereafter. The salvage value of the system is 60,000 if you sell after 1 year of use. The salvage value decreases by $10,000 each year thereafter. The maximum useful life of the machine is 4 years. Using a MARR of 15% per year, determine the ESL and the corresponding Equivalent Annual Cost of the system. Part A: An engineer estimated the equivalent annual costs of a currently installed machine and a new machine to replace it as follows: Years Retained Defender EAC Challenger EAC 1 145,000 136,000 2 96,430 126,000 63,317 92.000 39,321 53,000 5 49,570 38,000 3 4 a) Determine the economic service lives of the defender and challenger. b) What should be the replacement decision? Decision 1: Replace the Defender Now Decision 2: Retain the Defender till the end of its useful life Decision 3: Retain the Defender for one more year then re-do the replacement analysis then? Please justify to receive the full point. c) The defender was bought three years ago for $350,000. The current value of that machine is $150,000. The market value of the machine after 1 year is going to be $100,000. The operation cost of this machine at year 1 (from now not from the date of purchase) is $75,000. The interest rate is 20%. Based on this was the engineer's calculation of the red number in the table correct? If no, then what should be the correct number? Part B (separate from part A): An injection molding system has a first cost of $180,000, and an annual operating cost of $84,000 in year 1, increasing by $5000 per year thereafter. The salvage value of the system is 60,000 if you sell after 1 year of use. The salvage value decreases by $10,000 each year thereafter. The maximum useful life of the machine is 4 years. Using a MARR of 15% per year, determine the ESL and the corresponding Equivalent Annual Cost of the system
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