Use the cash-flow approach to the replacement study

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Reference no: EM13771137

A piece of equipment that was purchased two years ago for $59,000 was expected to have a useful life of 5 years with a $5,000 salvage value. Since its performance was less than expected, it was upgraded for $20,000 one year ago. Increased demand now requires that the equipment be upgraded again for an additional $14500 so that it can be used for three more years. Its annual operating costs will be $25,000 and it will have a $10,000 salvage after three years. Alternatively, it can be replaced with new equipment costing $61,000 with operating costs of $13,000 per year and a salvage value of $25,000 after three years. If replaced now, the existing equipment will be sold for $8000. Calculate the annual worth’s of the defender and of the challenger if the interest rate is 12.2%. Use the cash-flow approach to the replacement study.(Even though, apparently, only a moron or a thief would use it in real life.)

Defender AW = $

Challenger AW= $

Reference no: EM13771137

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