MACRS and the Replacement Decision. You are given the following data:

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Determine the NPV of the replacement decision assuming a desired ROR of 16 percent and a 40 percent income tax rate.

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Existing machine: Cost.... $70,000 Book value 30,000 Replacement machine: Cost...... Estimated salvage value. $180,000 10,000 Salvage value 0 Annual cash operating costs.... 8,000 Annual depreciation.. 5,000 MACRS depreciation method... 5 years Annual cash operating costs. 50,000 Useful life.. 6 years Present sales value 50,000 Remaining life 6 years