Please Show detail work on Excel File 9. The following table gives total margina

Question

Please Show detail work on Excel File

9. The following table gives total marginal cost estimates for a defender piece of equipment. Calculate the defender's EUAC (use MARR = 10%) for years 1-5. What is the defender's nimu Year EUAC Marginal Cost S31,250 $30,000 $28,000 $29,000 $36,250 4 Is this EUAC relevant for what your author calls Situation 1 replacement decisions? Situation 2 decisions? Briefly explain. Your textbook (Chapter 13) discusses how to go about doing a replacement analysis (keep a defender or replace it with a challenger) under various circumstances Briefly summarize what your text calls Techniques 1, 2, and 3 and the conditions under which eaclh technique is most appropriate. All three techniques implicitly make the repeatability assumption. Explain what this assumption entails and conditions under which it is not appropriate

Explanation / Answer

a.) Marginal yearly cost estimates are $31,250   30,000    28,000    29,000   36,250

Present Value of yearly Cost estimates $31,250/1.10      30,000/1.102   28,000/1.103    29,000/1.104   36,250/1.105

                                               = 28,409.09     24,793.39        21,036.81         19,807.39        22,508.40

Cumulative Present Values        = 28,409.09     53,202.48       74,239.29        94,046.68         116,555.08

EUAC Costs for Year-1             = 28,409.09/{1-(1.10)-1/0.10)}   =$ 31,250.00

EUAC Costs for Year-2             = 53,202.48/{1-(1.10)-2/0.10)}   =$ 30,654.76

EUAC Costs for Year-3             = 74,239.29/{1-(1.10)-3/0.10)}   =$ 29,852.72

EUAC Costs for Year-4             = 94,046.68/{1-(1.10)-4/0.10)}   =$ 29,668.98

EUAC Costs for Year-5             = 116,555.08/{1-(1.10)-5/0.10)}   =$ 30,746.94

Since, EUAC is minimum in Year-4, the minium cost life is 4 years.

Reference of Situation-1 and Situation-2 is not given in the problem.

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