Economic Analysis Team Project California State Polytechnic University, Pomona Replacement Analysis (Team 3) Winter Quarter, 2008 Repair or Replace Old.

Economic Analysis Team ProjectEconomic Analysis Team Project

California State Polytechnic University, Pomona

Replacement Analysis (Team 3)

Winter Quarter, 2008

Repair or Replace Old Computers

Team Members

• Paul S. Cobian -Organizer

• Mynor Piedrasanta -Techie

• Spencer Lee -Summarizer

California State Polytechnic University, Pomona

ScenarioDefender

Fifty, 5 year old computers are being considered for replacement. They have no present or future salvage value. The current maintenance cost is $10,000 per year, and is expected to increase $2500 per year in future years.*

*All prices are estimates

Brand new computer can be purchased for $60,000, with the manufacturers warranty covering the first two year’s maintenance and repair costs. In the third year, maintenance costs will be $2,500 per year, and is expected to increase $1,250 per year in the future. They will have a future salvage value of $10,000 in the 5th year.*

Using an 8% interest, and replacement analysis technique, determine if a replacement decision should be made.

ScenarioChallenger

*All prices are estimates

Optional Resources

• Contact Computer Vendor for desktop prices– Dell

– HP

• Discussion with IT Department(s)• Contact credit company for business related loans

– Interest Rate