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QUESTION 4 [30 Marks] a) A FN325 Lathe machine was purchased two years ago and had an estimated salvage value of RM2,000 at the end of its seven-year life. Operating costs are RM2,000 per year. A salesperson for another company is offering a replacement, NC345 Lathe machine, for RM14,000, with a salvage value of RM1,400 after five years. Operating costs for FN345 Lathe machine will only be RM1,400 per year. A trade-in allowance of RM10,400 has been offered for FN325 Lathe machine. If the before tax interest rate is 12% per year, should you replace the FN325 Lathe machine? [15 Marks) b) FTKPM Printing Sdn. Bhd 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. The operating costs are running at the rate of $8,000 per year. The anticipated salvage value of the machine has been reduced to $2,500 at the end of the machine's remaining useful life. In addition, the company has found that the current machine has a market value of $10,000 today. The equipment vendor will allow the company this full amount as a trade-in on a new machine. Another printing machine is being offered for $15,000. Over its three-year useful life, the new machine will reduce operating costs from $8,000 a year to $6,000. It is estimated that the new machine can be sold for $5,500 at the end of year 3. If the new machine were purchased, the old machine would be sold to another company rather than traded in for the new machine. Assuming that the firm's interest rate is 12%, decide whether replacement is justified now? [15 Marks]