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

2. Team Members Paul S. Cobian-Organizer Mynor Piedrasanta-Techie Spencer Lee-Summarizer California State Polytechnic University, Pomona

3. Scenario Defender 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

4. 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 5 th year.* Using an 8% interest, and replacement analysis technique, determine if a replacement decision should be made. Scenario Challenger *All prices are estimates

5. Optional Resources Contact Computer Vendor for desktop prices –Dell –HP Discussion with IT Department(s) Contact credit company for business related loans –Interest Rate