One year ago a machine was purchased at a cost of $2,000, to be useful for 6

years. However, the machine has failed to perform properly and has a costs of

$500 per year per year for repairs, adjustments, and shutdowns. A new machine is

available to accomplish the functions desired and has an initial costs of $3,500. Its

maintenance costs are expected to be $50 per year during its service life of 5

years. The approximate market value of the present machine has been roughly

$1,200. If the operating costs (other than maintenance) for both machines are

equal, show whether it is economical to purchase te new machine. Perform a

before-tax study using an interest rate of 12%, and assume that the salvage values

will be negligible.