IE deparment is thinking of replacing the current station ZM-640 in the lab due

Question

IE deparment is thinking of replacing the current station ZM-640 in the lab due to performance problems.ZM-640 was purchased 5 years ago and originally cost 30000TL.It has a present realizable MV of 21000TL.A new workstation will require an investment of 38000TL and is expected to have year-end market values(MV) and annual expenses(AE) as follows;(TL means Turkish Lira.You can say dollar instead of it.)

Fill the tables below using a before-tax MARR value of 8% per year.

CHALLENGER

DEFENDER

b)For how many years should the new workstation be retained in service if purchased?

c)Due to budget constraint, keeping ZM-640 is also an option.What is the economic life of the current asset?

d)At the end of which year should the defender be replaced?

ZM-640 End of Year k MV,End of Year k(TL) Annual Expenses,Ek (TL) 1 18000 9000 2 15000 7000 3 12000 6000 4 6000 5000

Explanation / Answer

Ans B The years would be 5.

Ans C The economic life of current asset is 50,000

Ans D At the end of 4th yeare the detended would be replaced.

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