Pineapple Ltd is considering replacing its current stock of computers with a new model.It plans to evaluate three options based on the following information:
Management is considering three options:
(i)Replace the old computers now and operate Model XA for four years,then replace with Model XD and operate for eight years,to be replaced in perpetuity;
(ii)Replace the old computers now and operate Model XXD for 12 years,to be replaced in perpetuity;
(iii)Replace the old computers now and undertake Model XA for three times its estimated life.
Which option should management choose?
A)Option (i).
B)Option (ii).
C)Option (iii).
D)Indifferent between options (i)and (ii).

Question

Pineapple Ltd is considering replacing its current stock of computers with a new model.It plans to evaluate three options based on the following information: 
Management is considering three options:
(i)Replace the old computers now and operate Model XA for four years,then replace with Model XD and operate for eight years,to be replaced in perpetuity;
(ii)Replace the old computers now and operate Model XXD for 12 years,to be replaced in perpetuity;
(iii)Replace the old computers now and undertake Model XA for three times its estimated life.
Which option should management choose?
A)Option (i). 
B)Option (ii). 
C)Option (iii). 
D)Indifferent between options (i)and (ii).

Quizplus · Accepted Answer

After evaluating the three options, it is clear that Option (ii) of replacing the old computers now and operating Model XXD for 12 years, to be replaced in perpetuity, is the best choice for Pineapple Ltd. This is because, in Option (i), the company would have to replace the computers twice in the next 12 years, which will result in additional costs. In Option (iii), the cost of maintaining and repairing the Model XA beyond its estimated life may outweigh the benefits, and the company may have to replace them earlier than expected. Hence, Option (ii) is the most cost-effective and productive option for Pineapple Ltd.

Pineapple Ltd Is Considering Replacing Its Current Stock of Computers