The present worth of the after-tax cash flows of an existing machine (defender) with three-year remaining useful life and a replacement alternative (challenger) with a five-year useful life are given in the table below. The after-tax MARR is 12% per year for the company that is considering the replacement. Please answer the following questions based on appropriate quantitative calculations.

(a) What is the economic life and minimum equivalent uniform annual cost for each asset? (b) When should the existing machine be replaced with the challenger? Why so? (c) What assumption(s) have you made in answering part (b) of the question?

Year 1 2345 2 3 5 Present Worth of After-Tax Cash Flows Defender Challenger -$14,020 -$18,630 -28,100 -34,575 -43,075 -48,130 -65,320 -77,910