Discussion
If the challenger's minimum equivalent uniform annual cost is 18 000, that defender should be
Answer: B
Correct answer: replaced now, its marginal cost being higher
The defender’s marginal cost for the coming year works out at 20,000 - 8,000 of value lost, 3,000 of interest on the 30,000 tied up, and 9,000 to run it. Against a challenger able to provide the service for 18,000 a year, keeping the defender costs 2,000 more, so it should be replaced now.
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