A machine purchased 2 years ago for $50,000 is now too slow to satisfy present demand. The machine can be upgraded now for $16,000 or sold for $6,000 (that is, first cost of $22,000). The current machine will have a constant annual operating cost of $27,000 per year and a salvage value of $12,000 in 3 years. If current machine is upgraded, it will definitely be retained for 3 more years before it is replaced. Alternatively, the current machine can be replaced with a new equipment costing $75,000, constant annual operating costs of $12,000 per year and an expected salvage of $23,000 after 3 years. Determine the annual worth of the challenger and defender at MARR of 8% per year using a 3-year planning horizon.

In each of the cases below, assume division x has a product that can be sold either to outside customers or to division y of the same company for use in its production process. the managers of the divisions are evaluated based on their divisional profits. case a b division x: capacity in units 200,000 200,000 number of units being sold to outside customers 200,000 160,000 selling price per unit to outside customers $ 90 $ 75 variable costs per unit $ 70 $ 60 fixed costs per unit (based on capacity) $ 13 $ 8 division y: number of units needed for production 40,000 40,000 purchase price per unit now being paid to an outside supplier $ 86 $ 74 required: 1. refer to the data in case a above. assume in this case that $3 per unit in variable selling costs can be avoided on intracompany sales. a. what is the lowest acceptable transfer price from the perspective of the selling division? b. what is the highest acceptable transfer price from the perspective of the buying division? c. what is the range of acceptable transfer prices (if any) between the two divisions? if the managers are free to negotiate and make decisions on their own, will a transfer probably take place?