Question 3 (25 points): Company X is considering to replace a steam separator to get more accuracy chemical research results. The old steam separator can still be used for 5 years. The financial data for the new improved machine is as follows: Challenger: A new steam operator Cash Flow Time Investment $75,000 Salvage $70,000 EOY 1 Salvage decrease 2% (per year) 0&M $10,000 EOY 1 0&M Cost increase 10% (per year) Investment cost $75,000 Estimated useful life of 5 years Salvage value of $70,000 in EOY 1, decreasing at a rate of 2% each year. Operating and maintenance costs are expected to be $10,000 at EOY 1 and increasing at a rate of 10% each year. The financial data for the old machine (still in use) is as follows: Defender: The old operator Cash Flow Time Current market Value $55,000 Salvage $45,000 EOY 1 Salvage decrease 8% (per year) 084M $9,000 EOY 1 0&M Cost increase 15% (per yea r) Estimated useful life of 5 years Salvage value of $45,000 at EOY 1 (from today), decreasing at a rate of 8% each year. Current market value of $55,000 Operating and maintenance costs for the next 5 years are expected to be $9,000 in the first year increasing at a rate of 15% each year. With a MARR of 12%, calculate the following: a. b. Calculate the economic service life for each alternative. [7+7 points) C. Compare the cash flow diagram for each option (5 points) How many years should the defender be kept? (6 point)