Question: Please help with this practice problem I am having difficulty with! Thank you in advance! Efficianado Inc. is trying to determine an optimal replacement policy

Please help with this practice problem I am having difficulty with! Thank you in advance!

Please help with this practice problem I am having difficulty with! Thank

Efficianado Inc. is trying to determine an optimal replacement policy for one of its machines. The cost of the machine is $15,000 and the annual maintenance costs are $1,000 in the first year, $2,000 in the second year and $3,000 in the third year. Anticipated salvage values are $6,000, $3,000 and $0 at the end of years 1 through 3, respectively. Assume that the company's revenues are unaffected by the replacement policy and that the firm has a 21% tax rate, and a 14% p.a. required return on this project. Should the equipment be replaced every year, every second year, or every third year? Be sure to explicitly consider the depreciation and tax effects

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