Degnan Dance Company, Inc., a manufacturer of dance and exercise apparel, is considering replacing an existing piece of equipment with a more sophisticated machine. The following information is given. Exsting machine/ proposed machine $100,000/ $150,000 Purchased 2 years ago/ Installation $20,000 Depreciation using MACRS over a 5-year recover schedule/ Depreciation - the MACRS Current market value = $105,000/ 5 year recvery schedule will be used Five year usable life remaining/ five year usable life expected Earnings before depreciation and taxes: Year/ Existing machine/ proposed machine 1/ $160,000/ $170,000 2/$150,000/ $170,000 3/$140,000/$170,000 4/$140,000/$170,000 5$140,000/$170,000 The firm pays 40 percent taxes on ordinary income and capital gains. Degnan