Economics
Searching for ways to cut costs and increase profit, one of the industrial engineers at Home Comfort
Furniture Manufacturers, Inc. determined that the equivalent annual worth of an existing machine over
its remaining useful life of 2 years is $-69,000 per year. The IE also determined that used machines like
the one currently in use are not available any longer, but the defender can be replaced with a
challenger that is more advanced. It will have an AW of $-77,050 if it is kept for 2 years or less, $-72,075
if it is kept between 3 and 4 years, and $-65,000 if it is kept for 5 to 10 years. If the company uses a
specified 3-year planning horizon and an interest rate of 14% per year. a) Determine when the
company should replace the machine. b) Determine the AW for the next 3 years. The AW for the next 3
years is
$.
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Explanation:
gn sweet dreams sd
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