The Engineering Manager of MNO Limited insists that management should maintain an old piece of equipment that had been used for five years and is fully depreciated rather than buy a new one. The old equipment has a current operating cost of GH53,000 per annum. The operating cost of the equipment is expected to increase at 5% every year over the next four years, with a sale value of GH6,500 in the fifth year. The Engineering Manager has proposed, that a new system with enhanced technology to reduce operating cost to GH32,000 for the next three years and GH33,600 for the fourth and fifth years be introduced. The new equipment will cost GH60,000 and when introduced, a redundancy cost of GH25,000 will be paid, with the old equipment sold for GH12,000. The sale value of the new equipment will be GH10,200 after its five years useful life. REQUIRED: Using the net present value (NPV) method of capital appraisal with 20% cost of capital, advice management on which option MNO Limited should go for. Factors for the present value of GH1 applying a cost of capital rate of 20%: Year Factors 1 0.833 2 0.694 3 0.579 4 0.482 5 0.402