Contemporary Engineering Economics 6th Edition by Chan Park

تمرين 50

Five years ago, a conveyor system was installed in a manufacturing plant at a cost of $35,000. It was estimated that the system, which is still in operating condition, would have a useful life of eight years with a salvage value of $3,000. It was also estimated that if the firm continues to operate the system, its market values and operating costs for the next three years would be as follows.
A new system can be installed for $43,500; it would have an estimated economic life of 10 years with a salvage value of $3,500. Operating costs are expected to be $1,500 per year throughout the service life of the system. The firm's MARR is 18%. The system belongs to the seven-year MACRS property class. The firm's marginal tax rate is 35%.
(a) Decide whether to replace the existing system now.
(b) If the decision is to replace the existing system, when should replacement occur