A biogas plant has a five-year-old equipment that was initially purchased for $80,000. The equipment can be kept in service for an additional five years or it can be sold for $45,000 and replaced with new equipment. The purchase price of the replacement equipment is $65,000. The estimated market value and operating and maintenance costs over the five-year planning period are shown in the table given below. Assuming the MARR is 8%: (a) Determine the economic life of the challenger, and (b) Determine when the defender should be replaced.

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Defender MV at Year EOY O&M Costs Challenger MV at O&M EOY Costs 1 $40,000 $25,000 2 $36,000 $28,000 3 $30,000 32,000 4 $28,000 $35,000 5 $25,000 $38,000 $55,000 $18,000 $48,000 $22,000 $42,000 $27,000 $36,000 $31,000 $30,000 $34,000 Year 4 Operations and maintenance $35,000 $35,000 $40,000 $45,000 $50,000 $55,000 $50,000 $45,000 $35,000 $30,000 $25,000 $20,000 MV