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9-2. 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. (9.7)
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