Business
Business, 12.08.2020 08:01, lifeisgaming37

State-of-the-art digital imaging equipment purchased 2 years ago for $50,000 had an expected useful life of 5 years and a $5000 salvage value. After its installation the performance, it was upgraded for $20,000 1 year ago. Increased demand now requires another upgrade for an additional $26,000 so that it can be used for three more years. Its new annual operating cost will be $30,000 with a $13,000 salvage after the 3 years. Alternatively, it can be replaced with new equipment costing $64,000, an estimated AOC of $15,000, and an expected salvage of $24,000 after 3 years. If replaced now, the existing equipment can be traded for only $9,000. Use a MARR of 12% per year. Required:
a. Determine whether the company should retain or replace the de- fender now.
b. Based on the poor experience with the current equipment, assume the person doing this analysis decides the challenger may be kept for only 2 years, not 3, with the same AOC and salvage estimates for the 2 years. What is the decision?

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