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