An asset purchased three years ago for $20,000 can be replaced by a new type of

Question

An asset purchased three years ago for $20,000 can be replaced by a new type of equipment. The market value of the old machine is currently $13,000 and will be $9,000, $8,000, $6,000, $2,000, and $0 at the end of each of the next five years. The annual operating costs (AOC) for each of the next five years will be $2,500, $2,700, $3,000, $3,500, and $4,500. How much longer should the defender be kept, if the MARR is 10%?

Keep it for four more years

Replace it this year

Replace it next year

Keep it for three more years

Keep it for four more years

Replace it this year

Replace it next year

Keep it for three more years

Explanation / Answer

C.  
Replace it next year

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