Company purchased new machine 2 years ago for 96000 falls into 5 years macrsca

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    Company purchased new machine 2 years ago for 96000 falls into 5 years macrscan currently be sold for 43800 new eqipment will cost 320000 it also falls into
    5 year macrs new machine will provide the following added cost saving for the next 6 years

    1-70000

    2-60000

    3-58000

    4-56000

    5-53000

    6-42000

    tax rate 40% and the cost of capital is 11%

    a=what is book value of the old equipment

    b=what is tax loss on the sale of old equipment

    c=what is tax benefit from the sale

    d=what is cash inflow from the sale of old equipment

    e=what is cost of new equipment include inflow from the sale of old equipemt

    f=Determine deprication schedule for the new equipemt

    g-determine depreciation of the remaining years of the old

    h=determine incremental depreciation between old and new and related tax shield benefits

    i=compute after tax benefits of the cost savings

    j=add depreciation and tax shield benefits and after cost saving and determine the present value

    k-compare the PV of incremenetal benefits to the net cost of new equipment

    should the replacement be undertaken?

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