A high-speed electronic assembly machine was purchased two years ago for $50,000. At the present time, it can be sold for $27,000 and replaced by a newer model having a purchase price of $38,500; or it can be kept in service for a maximum of one more year. The new assembly machine, if purchased, has a useful life of not more than two years. If the before-tax MARR is 15 %, when should the old assembly machine be replaced? Use the following data table for your analysis.

Challenger Year Market Value O&M Costs $38,500 30,000 $10,500 27,000 13,500 Defender Market Value O&M Costs $27,000 18,500 $14,500