Your company bought a production line 5 years ago for $75,000. At that time, it was estimated to have a service life of

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Your company bought a production line 5 years ago for $75,000. At that time, it was estimated to have a service life of 15 years and salvage at the end of its service life of $20,000 today. Your boss recently proposed to replace the production line with a modern production line expected to last 20 years and cost $120,000 today. This new production line could provide $10,000 savings in annual operating and maintenance costs, and have a salvage value of $30,000 at the end of 20 years. The seller of the new production line is willing to accept the old production line as trade-in for its current fair market value, which is $22,000 today. Your boss estimates that if the old production line is kept for 10 more years, its salvage value will be $15,000. If MARR is 8% per year, use replacement analysis to answer the following
question: Should you keep the old production line or replace it with a new production line?
Part A: What is the sunk cost, if there is one?
There is no sunk cost
50000
55000
53000
75000
Question 6 Part B: Complete the following table of information.
Part C: What is the AEC of the defender?
Part D: What is the AEC of the challenger?
Part E: Should you keep the old production line?
Yes, the AC of the challenger is greater than the AC of the defender.
Yes, the AC of the challenger is less than the AC of the defender.
No, the AEC of the challenger is greater than the AEC of the defender.
No, the AEC of the challenger is less than the AC of the defender.