Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 29

A piece of equipment that was purchased 2 years ago by Toshiba Imaging for $50,000 was expected to have a useful life of 5 years with a $5000 salvage value. Its performance was less than expected, and it was upgraded for $20,000 one year ago. Increased demand now requires that the equipment be upgraded again for another $17,000 so that it can be used for 3 more years. If upgraded, its annual operating cost will be $27,000 and it will have a $12,000 salvage after 3 years. Alternatively, it can be replaced with new equipment priced at $65,000 with operating costs of $14,000 per year and a salvage value of $23,000 after 6 years. If replaced now, the existing equipment will be sold for $7000. Determine the values of P, S, AOC, and n for the defender in a replacement study.