ABC Gas industries is considering a replacement of an old petroleum refining machine (model 16) acquired 4 years ago with costs of:

Purchasing price450,000

Shipping & Handling costs10,000

Installation cost15,000

The new model 107 will be acquired at costs of

Purchasing price750,000

Shipping & Handling costs20,000

Installation cost30,000

The new model will result in cost savings of 50,000 annually during years 1 to 4, 20,000 annually in the next 5 years and 10,000 annually during the last 2 years. The old model could be sold at his fair market value $240,000. ABC Gas industries tax rate is 36% and cost of capital is 16%.

REQUIRED

a.Model 16 Book Value