Redo Problem 14.17 with the following additional information. The old machine has been fully depreciated.

Question:

Redo Problem 14.17 with the following additional information.
• The old machine has been fully depreciated.
• The new machine will be depreciated under a seven-year MACRS class.
• The marginal tax rate is 35%, and the firm's after-tax is 10%.
In Problem 14.17
Eight years ago, a lathe was purchased for $45,000. Its operating expenses were $8,700 per year. An equipment vendor offers a new machine for $53,500. An allowance of $8,500 would be made for the old machine when the new one is purchased. The old machine is expected to be scrapped at the end of five years. The new machine's economic service life is five years with a of $12,000. The new machine's O&M cost is estimated to be $4,200 for the first year, increasing at an annual rate of $500 thereafter. The firm's is 12%. What option would you recommend? Salvage Value
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