The F-16 is an old airframe. It may remain in use for thirty more years if $20,000,000 worth of u…

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The F-16 is an old airframe. It may remain in use for thirty more years if $20,000,000 worth of upgrades are isntalled. On the other hand, the F-99 may be purchased as a replacement for $100,000,000 with a thirty year service life and lower yearly operational costs. Assume a pre-tax MARR of 20%. What is the better alternative? The figures necessary are in the table. Please explain evaluation process and formulas used.

f16 f99
current market value $25,000,000 purchase price $100,000,000
required upgrades $20,000,000
annual expenses $5,000,000 annual expenses $4,000,000
remaining useful life 30 years Useful life 30 years
market value at end of life $8,000,000 market value end of life $10,000,000
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