A machine was purchased 7 years ago for $9,000. Its present market value is $5,000, and its operating expenses are expected to continue at $1,000 a year. A second-hand machine costing $2,000 is available, but its operating expenses are expected to be $1,600 per year. It is anticipated that the machines will be in service for 6 more years with $1,000 salvage value for the present machine and zero for the second-hand machine. Using the "outsider viewpoint", and interest rate of 12%, find the best course of action for a 6-year study period.

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The previous machine that is being used has a 5000 current market ... View the full answer