Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 15

ABB Communications is considering replacing equipment that had a first cost of $300,000 five years ago. The company CEO wants to know if the equipment should be replaced now or at any other time over the next 3 years to minimize the cost of producing miniature background suppression sensors. Since the present equipment or the proposed equipment can be used for any or all of the 3-year period, one of the company's industrial engineers produced AW cost information for the defender and challenger as shown below. The values represent the annual costs of the respective equipment if used for the indicated number of years. Determine when the defender should be replaced to minimize the cost to ABB for the 3-year study period using an interest rate of 10% per year.