A company is considering replacing a machine (defender) that was bought six years ago for $50,000 and has now malfunctioned. The machine can be repaired to extend its life by Öve more years. If repaired, the machine will require an operating cost of $10,000 per year. If it is replaced, the new machine (challenger) will cost $44,000, will last for six years, and will have operating expenses of $5,000 per year. The challenger will have zero salvage value at the end of its six year life. The malfunctioned defender can be sold at a current market value of $15,000. If MARR is 12% per year, what is the maximum amount that the company should spend to repair the existing machine instead of switching to the challenger? Use the outsider viewpoint method. (Note: All values are before taxes, not tax calculations are necessary).
A company is considering replacing a machine (defender) that was bought
six years ago for $50,000 and has now malfunctioned. The machine can be repaired to
extend its life by Öve more years. If repaired, the machine will require an operating cost
of $10,000 per year. If it is replaced, the new machine (challenger) will cost $44,000, will
last for six years, and will have operating expenses of $5,000 per year. The challenger
will have zero salvage value at the end of its six year life. The malfunctioned defender
can be sold at a current market value of $15,000. If MARR is 12% per year, what is
the maximum amount that the company should spend to repair the existing machine
instead of switching to the challenger? Use the outsider viewpoint method. (Note: All
values are before taxes, not tax calculations are necessary).
please dont use excell
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