A certain narrow-aisle forklift truck costs $4,000. When it is replaced, it will be replaced with a truck of the same kind. Operating costs for this truck are $500 for the first year and increase at the rate of $40 per year squared thereafter. Technological improvements reduce operating costs by an estimated $30 per year. The salvage value of the trucks declines linearly over their seven-year life. The desired rate of return is to be 20 percent before taxes. When should the equipment be replaced?

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