Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 22

In planning a plant expansion, MedImmune has an economic decision to make-upgrade the existing controlled-environment rooms or purchase new ones. The presently owned ones were purchased 4 years ago for $250,000. They have a current "quick sale" value of $20,000, but for an investment of $100,000 now, they would be adequate for another 4 years, after which they would be sold for $40,000. Alternatively, new controlled-environment rooms could be purchased at a cost of $270,000. They are expected to have a 10-year life with a $50,000 salvage value at that time. Determine whether the company should upgrade or replace. Use a MARR of 20% per year.