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 $$505,000.$ If it is purchased, Lodi will incur costs of $$27,200$ to remove the present equipment and revamp its facilities. This $$27,200$ is tax deductible at time $0.$

Depreciation on the new machine for tax purposes will be allowed as follows: year $1,$$$101,000$; year $2,$ $$176,750$; and in each of years $3$ through $5,$$$75,750$ per year. The existing equipment has a book and tax value of $$272,000$ and a remaining useful life of $10$ years. However, the existing equipment can be sold for only $$122,000$ 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.

$\backslash$table$[[,\backslash$table$[[$Present$],[$Equipment$]],\backslash$table$[[$New$],[$Equipment$]]],[$Annual capacity $($units$),922,000,922,000],[$Annual costs:,$$95,000,$$$78,000$