A presently owned machine (Defender) has a useful life of 3 more years. Annual worth calculations for 1, 2, and 3 years are made and the following results are obtained. AW 1 = $ 42,400 AW 2 = $44,590...

A presently owned machine (Defender) has a useful life of 3 more years. Annual worth calculations for 1, 2, and 3 years are made and the following results are obtained.

AW₁
= $ 42,400

AW₂= $44,590

AW₃
= $47,356

A new improved machine (Challenger) that can be purchased will have a maximum useful life of 4 years. Annual worth calculations for 1, 2, 3, and 4 years yield the following results.

AW₁
= $85,000

AW_{2 =}
$53,571

AW₃
= $43,127

AW_{4 =}
$37,928

when should the presently owned machine (Defender) be replaced?

Select one:

a. Replace now

b. Replace 1 year later

c. Replace 3 years later

d. Replace 4 years later

e. Replace 2 years later