Engineering Economic Analysis

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After Completing This Chapter...

The student should be able to:

· Recast an equipment reinvestment decision as achallenger versus defender analysis.

· Use thereplacementanalysis decision mapto select the appropriate economic.analysis

technique to apply..

·Calculate theminimum cost lifeof economic challengers.

·"Incorporate concepts such asrepeatability assumption for replacement analysis

andmarginal cost datafor the defenderto select the appropriate economic analysis

techniques.

·Perform replacement problems on an after-tax basis, utilizing thedefender sign change

procedurewhen appropriate.

·Use spreadsheets for solving before-tax and after-tax replacement analysis problems.

QUESTIONS TO CONSIDER ;:0,

1. Using the Internet, can you determine what it would cost Intel to build a new fab from
   scratch?


2. Will Intel need to scrap all its current production assets when it does the upgrade?


3. How might Intel determine what to keep in operation and what to purchase new?

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