Solve the following problems on replacement analysis, comparing alternatives and depreciation. Please solve this problem MANUALLY.

A high-speed electronic assembly machine was purchased two years ago for ?50,000. At the present time, it

can be sold for ?25,000 and replaced by a newer model having a purchase price of ?42,500; 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. The projected resale values and operating and maintenance costs for the

challenger and the defender are shown in the accompanying table on a year-by-year basis. If the before-tax

MARR is1 5%, when should the old assembly machine be replaced? Use the following data table for your

analysis.

Challenger Defender EOY MV 0&M Costs MV 0&M Costs O P42,500 25,000 31,000 10,000 17,000 14,000 2 25,000 12,500