Question

A material handling system was purchased 3 years ago for $120731. Two years ago it required substantial upgrading at a cost of $15225. It once again is requiring an upgrading cost of $24583. Alternately, a new system can be purchased today at a cost of $189402, with a salvage value of 21008. The existing machine could be sold today for $51649. In an economic replacement analysis, what first cost should be assigned to the existing system? Enter your answer as follow: 123456.78
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Answer #1

In a economic Replacement analysis , the first cost of defender(existing system) is always the value at which it is priced today , which is the amount it can be sold today. Therfoe the exicxtng machine can be sold today for $51649 . Hence the first cost of existing system should be $51649 .

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