Rework Problem 12.23, assuming the following additional information:

• Option 1: The old sprayer has been fully depreciated. The new sprayer is
  classified as a seven-year MACRS property.
• Option 2: The larger capacity sprayer is classified as a seven-year MACRS property.
• Tax Information: The company’s marginal tax rate is 40%, and the firm uses an after-tax MARR of 12%.

Data From Problem 12.23

Georgia Ceramic Company has an automatic glaze sprayer that has been used for the past 10 years. The sprayer can be used for another 10 years and will have a zero salvage value at that time. The annual operating and maintenance costs for the sprayer amount to $15,000 per year. Due to an increase in business, a new sprayer must be purchased, either in addition to or as a replacement for the old sprayer. 

• Option 1: If the old sprayer is retained, a new, smaller capacity sprayer will be purchased at a cost of $48,000; this new sprayer will have a $5,000 salvage value in 10 years and annual operating and maintenance costs of $12,000. The old sprayer has a current market value of $6,000.
• Option 2: If the old sprayer is sold, a new sprayer of larger capacity will be purchased for $84,000. This sprayer will have a $9,000 salvage value in 10 years and annual operating and maintenance costs of $24,000.

Which option should be selected at MARR = 12%?