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The local telephone company purchased four special pole hole diggers8 years ago for $14,000 each.Owing to an increased workload, additional machines will soon be required.

Recently an improved model of the digger was announced. The new machines have a higher production rae and lower maintenance expense than the old machine but will cost $32,000 each with a service life of 8 years and salvage value of $750 each. The four original diggers have an immediate salvage of $2000 each and an estimated salvage value of $500 eacg 8 years hence. The averege annual maintenance expence of each old machine is about $1500, compared with $600 each for the new machines.

The workload would require three additional new machines if the oldmachines continue in service. However, is the old machine were all retire from service, the workload could be carried by six new machines with a annual saving of $12000 in operation cost.A Training program to prepare employees to run the machines will be necessary at an estimated cost of $1200 pre new machine. If the MARR is 8% before taxes, what should the copany do?