Problem 9.21
A biotech company planning a plant expansion is trying to determine whether it should
upgrade the existing controlled-environment rooms or purchase new ones. The presently-
owned rooms were purchased 4 years ago for $250,000. They have a current “quick sale”
value of $30,000. However, for an investment of $100,000 now, they can be adequate for
another 4 years, after which they could be sold for an estimated $40,000. Alternatively,
new controlled-environment rooms cost $300,000, have an expected 10-year economic
life, and a $50,000 salvage value after that time. Determine whether the company should
upgrade the existing controlled-environment rooms or purchase new ones. Use an MARR
of 12% per year and assume that used controlled-environment rooms will always be
available.