According to MAPI formula, the old machine should be replaced by a new one when

According to MAPI formula, the old machine should be replaced by a new one when (Here, CAM = Challenger's Adverse minimum, DAM = Defender's Adverse minimum)

Right Answer is:

CAM < DAM

SOLUTION

The term MAPI stands for Machinery and Allied Products Institute.

In MAPI the existing equipment which is to be replaced is known as DEFENDER and the new which will replace the old one is known as the CHALLENGER.

For estimating as to whether the proposed replacement is profitable, the “adverse minimum” of the defender and the challenger are found and compared. “Adverse minimum of the defender or the challenger is the lowest sum of the time adjusted average of capital cost and operating inferiority (expressed in terms of money) obtainable from a machine. The calculations can easily be done with the help of MAPI charts.

According to the MAPI formula, the old machine should be replaced by a new one when Challenger’s Adverse minimum is less than Defender’s Adverse minimum

CAM < DAM

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