A second-hand system wil cost $80,000. A new systers with improved technology ca

Question

A second-hand system wil cost $80,000. A new systers with improved technology can lifo of five years. The market valus of the used systom is decrease lab or hours by 20% o mpared to the used system. The new system wil oost $160 000 to purchase a distal Doth systems have au seul oxpectod to be $25,000 in five years, and the market value of the new system is anticipated to be $40,000 in five years. Cument maintenance adivity will require the used systom to be operated 8 hours per day for 20 days per mont.iflator osts $50 per hour and the MARR is 1% per month, which systern should be recommended? eCick to oon to view the interest and anuty tatie for disorote compounding when 1% per month. The PW of the difference between the old and new Which system should be recommended? Choose the correct answer below O New system systems is S(Rond to the neareet dolar) O Old system

Explanation / Answer

Operational time per month = 8*20 = 160 hrs
Labor savings as per the new system = .20*160 = 32 hrs
Value of the labor savings = $50 per hour * 32 = $1600 per month
Makret value of new system = $40000
Incremental market value = 40000 - 25000 = $15000

PW of difference = -40000+1600(P/A,1%,60)+15000(P/F,1%,60)
= -40000 + 1600 * 44.75 + 15000*0.552
= $39880

The investment is justified.

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