A furniture company intends to evaluate whether they want to stick with thequipment (defender) or replace them with the new productive equipment(challenger). The details of the cost required are shown in Table Q3(b) below. Usean interest rate of 20% per year.ItemsInitial cost eight (8) years ago (RM)Market value (RM)Yearly handling cost (RM)Life time (year)Salvage value (RM)DefenderChallenger450,00025,000700,000160,00070,00051050,000Use the replacement analysis to justify whether the existing equipment isrequired to be replaced with the new equipment.(ii)If the existing equipment (defender) could be sold in international market,determine how much is the minimum value of the defender so that thechallenger could replace the defender now?

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Use the replacement analysis to justify whether the existing equipment is required to be replaced with the new equipment. If the existing equipment (defender) could be sold in international market, determine how much is the minimum value of the defender so that the challenger could replace the defender now?

Use the replacement analysis to justify whether the existing equipment is required to be replaced with the new equipment. If the existing equipment (defender) could be sold in international market, determine how much is the minimum value of the defender so that the challenger could replace the defender now?

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter17: Long-term Investment Analysis

Section: Chapter Questions

Problem 10E

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