Engineering Board Exam Reviewer · Replacement Analysis · medium

The defender has an EUAC of about P52,381 and the challenger about P52,537 (from the two preceding problems, 12% interest). What is the economic decision?

  1. Replace with the challenger, because it has the longer life
  2. Replace with the challenger, because its EUAC is lower
  3. Keep the defender, because its EUAC is slightly lower
  4. The alternatives are exactly equivalent

Answer

C. Keep the defender, because its EUAC is slightly lower

Solution

Choose the alternative with the lower equivalent annual cost: P52,380.94<P52,536.52. The defender is cheaper by about P155.58 per year, so keep it.

More Replacement Analysis questions

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