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.