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Question: 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 a used piece of equipment (E1) and a new automated model (E2). The economic estimates for each are shown in the accompanying table.

2180_USeful Life.png

The MARR is 15% per year.

a. Which alternative is preferred, based on the repeatability assumption?

b. Show, for the coterminated assumption with a five year study period and an imputed market value for Alternative B, that the AW of B remains the same as it was in Part (a). [And obviously, the selection is the same as in Part (a).] Explain why that occurs in this problem.

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Microeconomics, Economics

Category:- Microeconomics
Reference No.:- M92314899

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