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A consulting aerospace engineer at Aerospatial estimated AW values for a present

ID: 1206382 • Letter: A

Question

A consulting aerospace engineer at Aerospatial estimated AW values for a presently owned, highly accurate steel rivet inserter based on company records of similar equipment.

If Retained This

AW Value,

Number of Years

$/Year

1

–62,000

2

–50,000

3

–47,000

4

–53,000

5

–70,000

A challenger has ESL = 2 years and AWC = $-49,000 per year. If the consultant must recommend a replace/retain decision today, should the company purchase the challenger? The MARR is 15% per year.

If Retained This

AW Value,

Number of Years

$/Year

1

–62,000

2

–50,000

3

–47,000

4

–53,000

5

–70,000

Explanation / Answer

the worth of investment after 5 years will becomes as

= 62,000*0.87= 53940

= 50,000*0.756= 37800

=47,000*0.657= 30879

=53,000*0.571= 30263

=70,000*0.497= 34790, the total investment will becomes= $187672

the total return for 5 years is= 49000*3.351= 164,199

the net return is = 164,199- 187,672= (23473 loss)

this project will provide losses only, so it is better to reject it

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