Engineering Economy 7th Edition by Leland Blank ,Anthony Tarquin

Exercise 16

In looking for ways to cut costs and increase profit (to make the company's stock go up), one of the company's industrial engineers (IEs) determined that the equivalent annual worth of an existing machine over its remaining useful life of 3 years will be $-70,000 per year. The IE also determined that a replacement with more advanced features will have an AW of $-80,000 per year if it is kept for 2 years or less, $-75,000 if it is kept between 3 and 4 years, and $-65,000 if it is kept for 5 to 10 years. If the engineer uses a 3-year study period and an interest rate of 15% per year, she should recommend that the existing machine be:
A)Replaced now
B)Replaced 1 year from now
C)Replaced 2 years from now
D)Not replaced