Question: A city water and waste-water department has a four-year-old sludge pump that was initially purchased for $65,000. This pump can be kept in service for an additional four years, or it can be sold for $35,000 and replaced by a new pump. The purchase price of the replacement pump is $50,000. The projected MVs and operating and maintenance costs over the four year planning horizon are shown in the table that follows. Assuming the MARR is 10%,
(a) determine the economic life of the challenger and
(b) determine when the defender should be replaced.
