### Nuclear power plant-planning to replace current equipment

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Lumberjack Power, operator of a nuclear power plant, is planning to replace its current equipment with some that is more environmentally friendly. The old equipment has annual operating expenses of \$6750 and can be kept for 8 more years. The equipment will have a salvage value of \$4000, if sold 8 years from now, and has a current market value of \$24,000, if it is sold now. The new equipment has an initial cost of \$62,000 and has estimated annual operating expenses of \$6250 each year. The estimated market value of the new equipment is \$19,000 after 8 years of operation. If the company's MARR is 15% per year, should the equipment be replaced? Use a study period of 8 years.

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