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5) (20 points) An old packaging equipment has worth today $20,000. Maintenance cost for the rst year is $10,000 and increasing every year by $5.000.

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5) (20 points) An old packaging equipment has worth today $20,000. Maintenance cost for the rst year is $10,000 and increasing every year by $5.000. The market value of the packaging equipment expected to decrease by $3,000 per year. A new packaging equipment that may replace the existing one, will cost $ 150,000. Annual maintenance costs of this new machine is $4000 for the rst year and expected to increase $1000 every year. Useful life of this equipment is 5 years and the salvage value is $2,000. If marr = %10, determine when, if at all, a replacement decision should be made

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