Q. No. 8: Azba corporation is considering automating his pen factory with the purchase of a $575,000 new machine. Shipping and installation would cost $15,000. Smith has calculated that automation would result in before tax savings of $65,000 a year due to reduced material cost and $65,000 a year due to reduced labor costs. The machine has a useful life of 5 years and the estimated salvage value of the machine at the end of five years is $100,000. The old machine is fully depreciated but has a salvage value today of $80,000 which can be sold at this value. The firm's marginal tax rate is 40 percent and firm use straight line depreciation method. Should Azba automate or not based on your calculations using Profitability Index? Q. No. 8: Azba corporation is considering automating his pen factory with the purchase of a $575,000 new machine. Shipping and installation would cost $15,000. Smith has calculated that automation would result in before tax savings of $65,000 a year due to reduced material cost and $65,000 a year due to reduced labor costs. The machine has a useful life of 5 years and the estimated salvage value of the machine at the end of five years is $100,000. The old machine is fully depreciated but has a salvage value today of $80,000 which can be sold at this value. The firm's marginal tax rate is 40 percent and firm use straight line depreciation method. Should Azba automate or not based on your calculations using Profitability Index