IE department is thinking of replacing the current workstation ZM-640 in the lab
ID: 2807382 • Letter: I
Question
IE department is thinking of replacing the current workstation ZM-640 in the lab due to performance problems. ZM-640 was purchased 8 years ago and originally cost 28000 TL. It has a present realizable MV of 22000 TL. A new workstation will require an investment of 34000 TL and is expected to have year end market values(MV) and annual expenses (AE) as follows :
End of Year k
a) Fill the tables below using a before-tax MARR value of 10% per year.
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?
(PLEASE, ANSWER BY EXPLAINING. I want to learn that how you solve it.)
ZM-640 End of Year k MV, End of Year k (TL) Annual Expenses, Ek (TL) 1 17000 5000 2 14000 7000 3 9000 7000 4 6000 4000Explanation / Answer
10% a Market value Loss in Value Loss of Int AOC Marginal cost year Disc. Fact Disc. Maginal cost Aw of Marginal Cost A=(Dis.Marginal*10%*(1+10%)^n)/((1+10%)^n-1) 0 22,000 0 1 17,000 (5,000) (2,200) -5000 (12,200) 0.90909 -11,090.91 (12,200) 2 14,000 (3,000) (1,700) -7000 (11,700) 0.82645 -20,760.33 (11,962) 3 9,000 (5,000) (1,400) -7000 (13,400) 0.75131 -30,827.95 (12,396) 4 6,000 (3,000) (900) -4000 (7,900) 0.68301 -36,223.76 (11,428) Market value Loss in Value Loss of Int AOC Mariginal cost year Aw of Marginal Cost 0 34,000 0 Disc fact Total cost 1 26,000 (8,000) (3,400) -3000 (14,400) 0.90909 -13,090.91 (14,400) 2 19,000 (7,000) (2,600) -4000 (13,600) 0.82645 -24,330.58 (14,019) 3 16,000 (3,000) (1,900) -4000 (8,900) 0.75131 -31,017.28 (12,473) 4 8,000 (8,000) (1,600) -2000 (11,600) 0.68301 -38,940.24 (12,285) Challenger Defender TCk EUACk TCk EUACk 1 (14,400) (14,400) 1 (12,200) (12,200) 2 (14,019) (14,019) 2 (11,962) (11,962) 3 (12,473) (12,473) 3 (12,396) (12,396) 4 (12,285) (12,285) 4 (11,428) (11,428) b economic life of challenger is 2 years c economic life of defender is 4 year d At the end of 4th year Defender should be replaced