Question: Use the PW method to select the better of the following alternatives:
Annual Defender: Challenger:
Expenses Alternative A Alternative B
Labor $300,000 $250,000
Material 250,000 100,000
Insurance and 4% of initial None
property taxes capital investment
Maintenance $8,000 None
Leasing cost None $100,000
Assume that the defender was installed five years ago. The MARR is 10% per year. (9.7) Definition of alternatives: A: Retain an already owned machine (defender) in service for eight more years. B: Sell the defender and lease a new one (challenger) for eight years. Alternative A (additional information): Cost of defender five years ago = $500,000 BV now = $111,550 Estimated MV eight years from now = $50,000 Present MV = $150,000.