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Subject:EconomicsPrice: Bought3
1.) A piece of production equipment is to be replaced immediately because it no longer meets quality requirements for the end product. The two best alternatives are used piece of equipment (A) and a new automated model (B). The economic estimates for each are shown in the accompanying table: Capital Investment Annual Cash Flow Useful life (years) Market Value A $20,000 $12,000 8 $8,000 B $45,000 $23,000 15 $9,000 The MARR is 20% year. Which alternative is preferred, based on: a. The co-terminated assumption with study period of 8 years. (Use the imputed market value technique for alternative B using Present Worth method) b. The co-terminated assumption with study period of 15 years. (Use Future Worth method)
