The replacement of a planning machine is being considered by the Reardorn Furniture Company. (There is an indefinite future need for this type of machine.) The best challenger will cost $35,000for installation and will have an estimated economic life of 11years and a$1,800 MV at that time. It is estimated that annual expenses will average $15,000 per year. The defender has a present BV of $5,000 and a present MV of $2500. Data for the defender for the next three years are given below. Using a before-tax interest rate of 18 % per year, make a comparison to determine whether it is economical to make the replacement now.

Year MV at End of BV at End of Expenses during Year the Year Year s 2,500 $3,750 $22,000 3,000 2,500 27,000 32,000 1,250 3,500