A machine which was bought for $8,000 5 years ago can be continued in service for at most 5 more years. A new lathe can be purchased for $22,000 and at the end of the 15-year planning horizon it will have a salvage value of $3,000. The defender has a market value of $2,000 currently; at the end of 5 years it will have a negligible salvage value. The annual disbursements for the defender equal $4,000 and for the challenger equal $3,000. If the defender is continued in service 5 years and replaced at that time, the replacement is anticipated to cost $25,000 initially, have annual disbursements of $4,000, and have a salvage value of $X after 10 years of service. The sum of years depreciation book value will be used to find X. A before-tax study and a MARR of 10% are deemed appropriate. Decide which alternative should be selected now by using

1. Conventional approach,
2. Cash flow approach.