An existing machine is worth P2500 today and will loss P1000 in value by next year plus P500/year thereafter. Its P8000 operating cost for this year is predicted to increase by P1000 annually, owning to |deterioration, it salvage value will be zero. A new machine that satisfactorily performs the same function as the existing machine can be purchased for P16000 and is expected to have relatively constant annual operating cost of P6000 up to the end of its 7 year economic life, at which time salvage value will be P1500. No major improvements are expected in the designs for the machines of this type within 7 years. If the minimum attractive rate or return is 12%, should the existing machine be replaced?