Question an existing robot can be kept if 2000 is spent now, Ask an Expert

Economics

Question: An existing robot can be kept if $2,000 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.

Defender Challenger

Current MV $38,000 Purchase price $51,000

Required upgrade $2,000 Installation cost $5,500

Annual expenses $1,400 Annual expenses $1,000

Remaining useful life 6 years Useful life 10 years

MV at end of useful life -$1,500 MV at end of useful life $7,000

The company's before-tax MARR is 20% 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.

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Microeconomics, Economics

Category:- Microeconomics
Reference No.:- M92315544

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