=+8" The firm Reds plc in Question 7 has not yet purchased the new machinery and is con-

sidering postponing such a cash outflow for a year or two. If it were to replace the existing machine now it could be sold immediately for £4,000. If the firm persevered with the old machine for a further year then £2,000 would have to be spent immedi-

ately to recondition it. The machine could then be sold for £3,000 in 12 months' time.

The third possibility is to spend £2,000 now, on reconditioning, and £1,000 on mainte-

nance in one year, and finally sell the machine for £1,500, 24 months from now.

Assuming all other factors remain constant regardless of which option is chosen, which date would you recommend for the commencement of the replacement cycle?