The AW values for retaining a presently owned machine for additional years are s
ID: 3072459 • Letter: T
Question
The AW values for retaining a presently owned machine for additional years are shown in the table. Note that the values represent the AW amount for each of the n years that the asset is kept, i.e., if it is kept 5 more years, the annual worth is $95,000 for each of the 5 years. Assume that future costs remain as estimated for the replacement study and that used machines like the one presently owned will always be available.
(a) What is the ESL and associated AW of the defender at a MARR of 12% per year?
(b) A challenger with an ESL of 7 years and an AWC = $-84,000 per year has been identified. Which AW will be less for the respective ESL periods?
a) The ESL of the defender is year(s) with the lowest AW of $ .
b) The (Click to select) challenger defender has the lower AW at $ for n equal to .
***So far I have figured this out
a) The ESL of the defender is year 1 (s) with the lowest AW of $-83000 .
b) The defender has the lower AW at $???? for n equal to 1 .
Retention Period, Years AW Value, $ per Year 1 -83,000 2 -96,000 3 -87,000 4 -95,000 5 -95,000Explanation / Answer
a) Economic service life is the year when the annual cost of defender is minimum.
Using the above table, Minimum AW is $83,000 at year 1
Therefore The ESL of the defender is 1 year with the lowest AW of $ 83,000.
b) Since the minimum annual cost of challenger is $ 84,000 which is higher than the defender minimum annual cost of $ 83,000.
Therefore the defender has the lowest AW at $83,000 for n equal to 1.
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