The projected market value and M&O costs associated with a presently owned machine are shown (next page). An outside vendor of services has offered to provide the service of the existing machine at a fixed price per year. If the presently owned machine is replaced now, the cost of the fixed-price contract will be $33,000 for each of the next 3 years. If the presently owned machine is replaced next year or the year after that, the contract price will be $35,000 per year. Determine if and when the defender should be replaced with the outside vendor using an interest rate of 10% per year. Assume used equipment similar to the defender will always beavailable.

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M&0 Cost, Market Value, per Year Year 30,000 25,000 14,000 10,000 8,000 -24,000 -25.000 -26,000