Lodi Fabrication is evaluating a proposal to purchase a new turbine to replace a less efficient machine presently in use. The cost of the new equipment at time 0, including delivery and installation, is $465,000. If it is purchased, Lodi will incur costs of $25,600 to remove the present equipment and revamp its facilities. This $25,600 is tax deductible at time 0. Depreciation on the new machine for tax purposes will be allowed as follows: year 1, $93,000; year 2, $162,750; and in each of years 3 through 5, $69,750 per year. The existing equipment has a book and tax value of $256,000 and a remaining useful life of 10 years. However, the existing equipment can be sold for only $106,000 and is being depreciated for book and tax purposes using the straight- line method over its actual life. Management has provided you with the following comparative manufacturing cost data. Annual capacity (units) Present Equipment 906,000 Annual costs: Labor Depreciation Other (all cash) $ 75,060 23,040 114,000 Total annual costs New Equipment 906,000 $ 62,000 32,400 51,000 $ 212,040 $ 145,400 The existing equipment is expected to have a salvage value equal to its removal costs at the end of 10 years. The new equipment is expected to have a salvage value of $141,000 at the end of 10 years, which will be taxable, and no removal costs. No changes in working capital are required with the purchase of the new equipment. The sales force does not expect any changes in the volume of Prov 3 of 2 Novt