A milling machine purchased by a machine tool company 12 years ago for $75,000 can be used for up to 2 years but only if upgraded at a cost of approximately $10,000. Otherwise, the estimated market values and operating cost shown below will apply. A challenger will cost $130,000 and have a maximum life of 3 years. It's market value and operating cost estimates are shown below. The machine tool company uses an interest rate of 12%/year in its economic decision making.

1)WHAT IS THE ECONOMIC SERVICE LIFE OF THE PROPOSED REPLACEMENT MACHINE?

ANSWER IS 2. I DONT KNOW HOW TO GET THERE.

2)WHAT IS THE RECOMMENDED COURSE OF ACTION?

ANSWER IS TO BUY NEW MACHINE AND KEEP FOR TWO YEARS. HOW DO I GET HERE?

Existing Machine Too Proposed Replacement -Market Market Value Year Value $ AOC, $/year$AOC, $/year -52,000 -61,000 110,000 95,000 70,000 30,000 32,000 33,000 9,000 2 3