Exam 13: Replacement Analysis

The EUAC of the challenger for an economic life of 5 years is $8,500. The marginal cost of the defender is provided in the table below. Determine when the defender should be replaced. Year 1 2 3 4 5 Margiral Cost, 5 7,500 8,000 8,500 9,000 9,500

The O & M cost of an equipment is given in the table below. Determine the EUAC of this equipment in year 6. Assume a MARR of 8%. Year 1 2 3 4 5 6 O\& M Cost \ 8,000 7,500 \ 6,000 \ 5,500 \ 4,500 8,000

Determine the minimum cost life of an equipment for which the marginal costs are given in table below. Use an interest rate of 10%. Year 1 2 3 4 5 6 Margiral Cost, \ 18,000 16,000 19,000 20,000 22,000 24,000

Obsolescence occurs when the technology used in an equipment has been surpassed by a better and newer technology.

Case Study 13 A CNC machining center was purchased 6 years ago for $100,000. The current market value is $200,000, which will decline as follows over the next 5 years: $140,000, $130,000, $120,000, $100,000, and $80,000. The O & M costs are estimated to be $36,000 this year. These costs are expected to increase by $5,000 per year starting year 2. MARR = 10% -The EUAC for defender in year 2 is ____________.

Marginal cost is the cost at which an asset has the minimum cost life.

Given the marginal cost data in the table below for a defender, it is economical to replace the defender in year 1 if EUAC of challenger is $12,500. Year Margiral cost of defender 1 \ 13,000 2 \ 12,000 3 \ 11,000 4 \ 16,000 5 \ 15,000

An equipment cost $80,000 initially. The market value has been declining at the rate of $15,000 yearly. The O & M costs in year 1 were $10,000 and have been increasing by $2,000 from year 2. Determine the minimum cost life of this equipment for a MARR of 10 %.

One of the replacement rule is when the defender's marginal cost becomes greater than the challenger's minimum EUAC, then replace the defender.

Case Study 13 A CNC machining center was purchased 6 years ago for $100,000. The current market value is $200,000, which will decline as follows over the next 5 years: $140,000, $130,000, $120,000, $100,000, and $80,000. The O & M costs are estimated to be $36,000 this year. These costs are expected to increase by $5,000 per year starting year 2. MARR = 10% -The marginal cost for defender in year 2 is ____________.

Case Study 13 A CNC machining center was purchased 6 years ago for $100,000. The current market value is $200,000, which will decline as follows over the next 5 years: $140,000, $130,000, $120,000, $100,000, and $80,000. The O & M costs are estimated to be $36,000 this year. These costs are expected to increase by $5,000 per year starting year 2. MARR = 10% -The foregone interest in year 4 is _______________.