Chartwells Dining Services is considering an upgrade to their commercial cooking and refrigeration equipment. The new equipment would cost $500,000, before considering the sale of the current equipment or any tax savings or losses that will occur as a result of that sale. The current equipment was purchased 2 years ago at a cost of $269,800 and is being depreciated using an accelerated depreciation method. The book value of the current equipment is the cost, less the accumulated depreciation from the last 2 years. If new equipment is purchased, it will be depreciated using the same accelerated depreciation method (table below). In addition, purchasing the new equipment will allow Chartwells to sell the current equipment for $10,600, the current market value. Finally, new equipment will result in annual cost savings for the next 5 years in varying amounts (listed below). Chartwells has a tax rate of 37% and requires a return on investment of 8% for all capital expenditures. Depreciation Incremental Cash Flow (Cash Savings) Year 1 = 21% $40,000 Year 2 = 33.2 $40,000 Year 3 = 20.2% $23,000 Year 4 = 12.5% $20,000 Year 5 = 13.1% $13,000