Bruin Manufacturing Is Evaluating Whether It Should Retain Its Current

Essay

Bruin Manufacturing is evaluating whether it should retain its current environmental test chamber and room or sell it immediately and purchase a new one. The relevant costs are shown below. The current one can be kept for another 5 years, given that an additional maintenance cost of $500 each year is provided each year. Determine whether the current equipment should be replaced. Use a before- tax MARR of 13% per year and the annual cost method. $$\begin{array} { | l | l | l | } \hline & \text { Defender } & \text { Challenger } \\\hline \text { Capital investment, } \$ 3 \text { years ago } & 33,000 & -\\\hline \text { Capital investment, } \$ & - & 38,000 \\\hline \text { Annual operating expenses, } \$ & 5250 & 5450 \\\hline \text { Annual maintenance, } \$ & 500 & -\\\hline \text { Current market value } & 13,000 & -\\\hline \text { Estimated salvage value at the end } & 1500 & 23,000 \\\text { of } 5 \text { additional years } & & \\\hline\end{array}$$