A high-speed electronic assembly machine was purchased two years ago for $50,000

Question

A high-speed electronic assembly machine was purchased two years ago for $50,000. A the present ume, it can be sold for $25,000 and replaced by a newer model having a purchase price of $45,000; or it can be kept in service for a maximum of one more year. The new assembly machine, if purchased, has a us more than two ars. If the before-tax MARR is 12%, when should the old assembly machine be replaced? Use the following data table for your analysis. Challenger Defender Year Market Value 0O&M; Costs Market Value O&M; Cos $45,000 32,000 25,000 $9,000 12,500 $25,000 16,500 $14,000 2 Click the icon to view the interest and annuity table for discrete compounding when the MARR per vear The minimum EUAC value of the challenger is s. (Round to the nearest dollar.)

Explanation / Answer

The current machinery should be replaced with the new machine as at Year 0, the IRR of the new machinery is more than the minimum acceptable rate of return.

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