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A present asset (defender) has a current market value of $85,000 (year 0 dollars). Estimated market...

A present asset (defender) has a current market value of $85,000 (year 0 dollars). Estimated market values at the end of the next three years, expressed in year 0 dollars, are MV1= $73,000, MV2 = $60,000, MV3 = $40,000. The annual expenses (expressed in year 0 dollars) are $15,000 and are expected to increase at 4.5% per year. The before-tax nominal MARR is 15% per year. The best challenger has an economic life of five years and its associated EUAC is $39,100. Market values are expected to increase at the rate of inflation which is 3% per year. Based on this information and a before-tax analysis, what are the marginal costs of the defender each year and when should you plan to replace the defender with the challenger?

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Ally Wells answered 4 months ago
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