You have a casualty problem with different replacement, that is, a non-identical replacement. Suppose you have a physically capable challenger to replace an asset. With the Average Rate of Attractiveness = 10% and the economic life of the challenger being 4 years and the annual cost at that life is 8,835.00. The market value of the defender being currently $8,000.00, will drop to $5,000.00 at the end of the year and the operating costs will be $5,500. In the second year, the market value of the defender will be $4,000.00 and the operating costs will be $6,000.00.

Based on this scenario it is correct to state.

a. Since uniform annual equivalent cost of the defender is less than the uniform annual equivalent cost of the challenger it is better to keep the defender for 2 more years. b. The equivalent uniform annual cost of the defender in year 2 is $8,442.00 c. Since uniform annual equivalent cost of the defender is greater than the uniform annual equivalent cost of the challenger it is better to keep the defender for 2 more years. d. The equivalent uniform annual cost of the defender in year 1 is $9,300.00 e. If the equivalent uniform annual cost of the challenger was $7500.00, it would be worth selling the asset in year 1.