laila Corporation, a sports equipment manufacturer, has a machine currently in use that was originally purchased $3$ years ago for $$200,000.$ The firm depreciates the machine under MACRS using a $5-$year recovery period.

Once removal and cleanup costs are taken into consideration, the expected net selling price for the present machine will be $$70,000.$ laila can buy a new machine for a net price of $$400,000($including installation costs of $$30,000).$ The proposed machine will be depreciated under MACRS using a $5-$year recovery period. If the firm acquires the new machine its working capital needs will change: Accounts receivable will increase $$40,000,$ inventory will increase $$15,000,$ and accounts payable will increase $$12,000.$

Earnings before depreciation, interest, and taxes $($EBDIT$)$ for the present machine are expected to be $$95,000$ for each of the successive $5$ years.For the proposed machine, the expected EBDIT for each of the next $5$ years are $$105,000,$ $$110,000,$$$120,000,$$$120,000,$ and $$120,000,$ respectively. The corporate tax rate $(T)$ for the firm is $40\%.$

MACRS $5-$year Table

$\backslash$table$[[$Recovery year,Percentage recovery$],[1,20\%$