1) (10) A company XYZ is trying to figure out the best time to replace a piece of equipment in a machine. We need to constantly run the machine to produce our goods. The cost of the machine = $15,000 Annual costs of maintenance: $1000 at the end of the 1st year, $2000 at the end of the 2nd year, and $3000 at the end of the 3rd year. Anticipated Salvage values are $6000, $3000, and $0 at the ends of Years 1, 2, and 3 respectively. Salvage value= price at which you can sell the equipment at a particular time. The firm uses straight line depreciation. Revenues are unaffected by the replacement policy. The firm pays a 34% tax rate. The required rate of return of the firm = 12% Considering the depreciation and tax effects, should the equipment be replaced every year, every second year, or every third year