(Solved): Three (3) years ago the Dobi Kita Sdn. Bhd. Company bought a dryer with an initial cost of RM 50,0 ...

Three (3) years ago the Dobi Kita Sdn. Bhd. Company bought a dryer with an initial cost of RM 50,000. The expected lifetime of the dryer is 8 years, the operational and maintenance cost is RM 20,000 a year with salvage value of RM 5,000 during that time. At this moment the dryer could not perform as expected due to the increase in demand. Thus, the company is thinking of replacing the dryer (defender) with a new one (challenger). A new dryer would cost RM 75,000 including installation. For a lifetime of 5 years, the operational and maintenance cost is RM 10,000 a year with no salvage value. If the company decide to buy a new dryer, the old dryer could be sold at a market value of RM 20,000. Assume the balance of the lifetime of the defender is 5 years and the salvage value and the operational and maintenance cost are remained the same as before. At MARR of 15% a year, determine whether the current dryer is required to be replaced with the new one according to the following methods: i) AWD = - RM 19,258 i) ii) Cash flow approach Opportunity cost approach ANSWER: 1) 11) AWD = RM 19 258 AWC = RM 26 408 AWD-RM 25 225 AWC = -RM 32 374|