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12.2 Macintosh Printing Inc. purchased a $20,000 printing machine two years ago. The company expected this machine to have a five-year life and a salvage value of $5,000. Unfortunately, the company spent $5,000 last year on repairs, and operating costs are now running at the rate of $8,000 per year. Furthermore, the anticipated salvage value has now been reduced to $2,500 at the end of the print- er's remaining useful life. In addition, the company has found that the current machine has a book value of $14,693 and a market value of $10,000 today. The equipment vendor will allow the company the full amount of the market value as a trade-in on a new machine. What value(s) for the defender is (are) relevant in our analysis? current 12.3 Consider again the scenario in Problem 12.2. Suppose that the company has been offered the opportunity to purchase another printing machine for $15,000. Over its three-year useful life, the machine will reduce labor and raw-materials usage sufficiently to cut operating costs from $8,000 to $6,000. This reduction in costs will allow after-tax profits to rise by $2,000 per year. It is estimated that the new machine can be sold for $5,500 at the end of year 3. If the new machine were pur- chased, the old machine would be sold to another company rather than be traded in for the new machine. Suppose that the firm will need either machine (old or new) for only three years and that it does not expect a new, superior machine to become available on the market during the required service period. Assuming that the firm's interest rate is 12%, decide whether replacement is justified now