A Manufacturer is considering replacing a production machine tool. The new machine, costing $40,000 would have a life of 4 years and no salvage value, but would save the firm $5000 per year in direct labor costs and $1500 per year in indirect labor costs. The existing machine can be repaired for $15,000 but will not realize any cost savings over the same 4 years. Using Annual cost flow analysis, determine which alternative is the most cost effective. Assume interest rate is 8%. Repair the machine O Buy the new machine