The company are considering selling their old machine that has a capital cost of 260 000 and replacing it with an up to date model costing 220 000. For immediate purchase the company will receive 120 000-part exchange allowance. Both the current and new machines are able to meet the expected company demand, estimated at: Year Units 1 90 000 2 50 000 3 30 000 After three years, it is predicted that demand will be zero due to the technological developments in the industry. The following data has been provided for the existing and new machine: Current Machine New Machine ner unit uer unit Direct Materials Direct Labour m_ Variable Overheads De-reciation Additional information (1) The selling price for each component is 5.00 and this will remain constant for the next three years. (2) The company expect the cost of direct materials and direct labour to increase by 5% each year. (3) The company predicts that repair and maintenance costs for the current machine will be 7000 per annum. (4) The current machine is expected to have a zero-residual value at the end of year 3. (5) The company predicts that repair and maintenance costs for the new machine will be 1000 per annum. (6) The new machine is expected to have a 75 000 residual value at the end of year 3. The company's cost of capital is 15%