7) (30 points) To meet an increase in demand, an existing machine must either be upgraded or replaced with a new machine. The existing machine has a remaining life of 5 years and is expected to have a salvage value of $5,000 at the end of its useful life. Operating and maintenance costs have been $17,500 per year. Currently the machine has a market value of $25,000. A new machine costs $75,000, has an annual O&M cost of $15,000 and a salvage value of $12,500 at the end of 5 years. Option 1. A new machine is purchased and the existing machine is sold at its market value. Option 2. The existing machine is upgraded and the upgrades are expected to cost $40,000 and the upgraded machine's salvage value and annual O&M costs are expected to remain the same as that of the existing machine Using the present worth measure, determine the preferred course of action using an interest rate of 10% per year compounded annually