please use pw method as shown in example 9-8 (second picture)

7. (2 points) An $90,000 baling machine for recycled paper was purchased by the XYZ company two years ago. The current MV of the machine is $60,000, and it can be kept in service for seven more years. MARR is 15% per year and the projected net annual receipts (revenues less expenses) and end-of-year market values for the machine are shown below. When is the best time for the company to abandon this project? 1 2 $30,000 $30,000 End of Year 4 $25,000 3 $28,000 5 $22,000 6 $16,000 7 $13,000 Net annual receipts Market value $50,000 $42,000 $35,000 $30,000 $25,000 $20,000 $15,000 receipts (revenues less expenses) and end-of-year market values for the machine are shown below. When is the best time for the company to abandon this project? End of Year 2 3 4 5 6 2 Net annual receipts $20,000 $20,000 $18,000 $15,000 $12.000 $6.000 $3.000 Market value 40,000 32.000 25.000 20.000 15.000 10.000 5,000 I Solution The PWs that result from deciding now to keep the machine exactly one, two, three, four, five, six, and seven years are as follows: Keep for one year PW(12%) = =$50,000 + ($20,000+ $40.000)(P/F.12%, 1) = $3,571. Keep for two years PW (12%) = --$50,000 + $20,000(P/F.12%, 1) + ($20,000 + S32,000) x (P/F.12%, 2) = $9.311. In the same manner, the PW for years three through seven can be computed. The results are as follows. Keep for three years. PW(12%) = $14.408 Keep for four years: PW(12%) = $18,856 Keup for five yeurs. PW(12%) = $21.466 - Best abandonment time Keep for six years: PW(12%) - $21.061