The AW values for retaining a presently owned machine for additional years are shown in the table. Note that the values represent the AW amount for each of the n years that the asset is kept, that is, if it is kept 5 more years, the annual worth is $95,000 for each of the 5 years. Assume that future costs remain as estimated for the replacement study and that used machines like the one presently owned will always be available.
(a) What is the ESL and associated AW of the defender at a MARR of 12% per year?
(b) A challenger with an ESL of 7 years and an AWC = $ ?89,500 per year has been identified. Which AW will be less for the respective ESL periods?
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(a) The ESL of the defender is 3 years with the lowest AW of $-85,000
(b) Defender has the lower AW at $-85,000 for n = 3.
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