=+4. Allentown Paving owns a cement mixer which is 3 years old with an expected life of 10 years. The machine originally cost $3,000,000.

Replacement cost prior to the appearance of the new technology was

$2,200,000. A newer machine comes on the market with a cost of

$3,600,000. Annual production of both technologies is 300,000 barrels of cement. Variable cost per barrel is $1 with the old mixer and $.50 for the new mixer. Allentown's cost of capital is 8 percent. The new machine has an extra life of 10 years.

Required:

a. Assuming that the old cement mixer is to be kept, determine the obsolescence writedown if current values are being used.