A mechanical engineer designs and sells equipment that automates
manual labor processes. He is offering a machine/robot combination
that will significantly reduce labor costs associated with
manufacturing garage-door opener transmitters. The equipment has a
first cost of $178,000, an estimated annual operating cost of
$49,000, a maximum useful life of 5 years, and a $21,500 salvage
value anytime it is replaced. The existing equipment was purchased
12 years ago for $65,000 and has an annual operating cost of
$78,000. The currently owned equipment can be used for 2 more years
after which it will be auctioned off for an expected amount of
$7,000, less 38% paid to the company handling the auction. The same
scenario will occur if the currently owned equipment is replaced at
present. Determine the defender and challenger estimates of P, n,
S, and AOC in conducting a replacement analysis today at an
interest rate of 20% per year. The P value for defender is $ . The
n value for defender is years. The S value for defender is $ . The
AOC value for defender is $ . The P value for challenger is $ . The
n value for challenger is years. The S value for challenger is $ .
The AOC value for challenger is $ .
