The challenger system has a maximum useful life

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Reference no: EM1389546

Halcrow, Inc., expects to replace a downtime tracking system currently installed on CNC machines. The challenger system has a first cost of $70,000 and an estimated annual operating cost of $20,000 in the first year. At an interest rate of 10% per year, determine the economic service life and corresponding AW value of the challenger system. Use a spreadsheet to plot the total AW curve and its components for the following conditions:

(a) The challenger system has a maximum useful life of 5 years, a uniform AOC cost of $20,000 over its useful life, and a $10,000 salvage value anytime it is replaced.

(b) The challenger system has an expected maximum life of 10 years, an AOC that will increase by 15% per year from the initial estimate of $20,000, and a salvage value that is expected to decrease by $1000 per year from the $10,000 estimated for the first year.

Reference no: EM1389546

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