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A company owns a 5-year-old turret lathe that has a book value of $25000. The present market value for the lathe is $16000. The expected decline in market value is $2000/year to a minimum market value of $4000. Maintenance plus operating costs for the lathe equal $4200/year.

A new turret lathe can be purchased for $45000 and will have an expected life of 8 years. The market value for the turret lathe is expected to equal $45000(.70) at the end of the year. Annual maintenance and operating costs is expected to equal $1600. Based on a 12% before-tax MARR, should the old lathe be replaced now? Use an equivalent uniform annual cost comparison, a planning horizon of 7 years, and the cash flow approach.