An existing robot can be kept if $1,700 is spent now to upgrade it for future se

Question

An existing robot can be kept if $1,700 is spent now to upgrade it for future service requirements. Alternatively, the company can purchase a new robot to replace the old robot. The following estimates have been developed for both the defender and the challenger. The company's before-tax MARR is 15% per year. Based on this information, should the existing robot be replaced right now? Assume the robot will be needed for an indefinite period of time Defender Current MV Required upgrade Annual expenses Remaining useful life MV at end of useful life $37,000 $1,700 $1,300 years - $1,600 Challenger Purchase price Installation cost Annual expenses Useful life MV at end of useful life $50,000 $5,400 $900 years $6,000 Click the icon to view the interest and annuity table for discrete compounding when the MARR is 15% per year The AW value of the defender is S(Round to the nearest dollar.) The AW value of the challenger is S(Round to the nearest dollar.) The existing robot V be replaced right now More Info Discrete Compounding: 1-15% Uniform Series Capital Recovery Factor To Find A Given P A/P 1.1500 0.6151 0.4380 0.3503 0.2983 0.2642 0.2404 0.2229 0.2096 0.1993 Compourn Compound Amount Factor To Find F Given P Present Worth Factor To Find P Given A Amount Factor To Find F Given A FIA 1.0000 2.1500 3.4725 4.9934 6.7424 8.7537 11.0668 13.7268 16.7858 20.3037 Present Worth Factor To Find P Given F Factor To Find A Given F A/F 1.0000 1.1500 1.3225 1.5209 1.7490 0.8696 0.7561 0.6575 0.5718 0.4972 0.4323 0.3759 0.3269 0.2843 0.2472 0.8696 1.6257 2.2832 2.8550 3.3522 3.7845 4.1604 4.4873 0.2880 0.2003 0.1483 0.1142 0.0904 0.0729 4 2.3131 3.0590 3.5179 4.0456 5.0188 0.0493

Explanation / Answer

Statement showing AW

For Defender

For challenger

Thus existing machine should be kept

Particulars 0 1 2 3 4 5 6 Total Opportunity loss -37000 Update required -1700 Annual expense -1300 -1300 -1300 -1300 -1300 -1300 Salvage value -1600 Total cash flow -38700 -1300 -1300 -1300 -1300 -1300 -2900 PVIF @ 15% 1 0.870 0.756 0.658 0.572 0.497 0.432 Present value -38700 -1130.43 -982.987 -854.771 -743.279 -646.33 -1253.75 -44312 PVIFA(15%,6 years) 3.784 AW( Total of PV/PVIFA) -11709

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