SMS Microsystems is considering thereplacement of a confocal microscope(CFM) in the quality control depart-ment. The closest CFM will re-quire at least $19,500 for installa-tion and will have an estimated eco-nomic life of 10 years; its end-of-life value is estimated to be roughly$3,000 MV. Annual operational andmaintenance expenses are estimatedto average about $14,000 per year.Due to the dynamic nature of mi-crosystems technology, the existingsystem (defender) has a book valueof $7,000 but a present market valueof only $4,000. It is estimated thatover the next three years the systemwill have the MV, BV, and expensedata shown in the table below. Us-ing a before-tax interest rate of 17%per year, make a comparison to de-termine whether it is economical tomake the replacement now.

\begin{tabular}{cccc} Year & MV & BV & Expenses \\ \hline 1 & $2,000 & $4,000 & $18,000 \\ 2 & $1,000 & $2,000 & $24,000 \\ 3 & $500 & $1,000 & $30,000 \\ \hline \end{tabular} \begin{tabular}{cccc} Year & MV & BV & Expenses \\ \hline 1 & $2,000 & $4,000 & $18,000 \\ 2 & $1,000 & $2,000 & $24,000 \\ 3 & $500 & $1,000 & $30,000 \\ \hline \end{tabular}