Suppose you have to decide whether to sell an old machine or keep it with a major overhaul:

1. A) Selling the machine at time zero for $750,000 with zero book value and paying tax of 40% of the sale price.
2. B) Keeping the machine, which requires a major overhaul cost of $1,000,000 at time zero. The overhaul cost is depreciable from time 0 to year 5 (over six years) based on MACRS 5-year life depreciation with the half year convention. In this case the overhauled machine can produce and generate equal annual revenue for five years (year 1 to 5) and salvage value of the machine will be $250,000 with zero book value at the end of year 5. The operating cost of the machine will be $400,000 per year from year 1 to year 5.

Calculate the minimum annual revenue that machine has to generate such that the NPV of keeping and overhauling the machine is equal to the NPV of selling the machine. Assume a 40% income tax rate and after-tax minimum ROR of 12%.

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Please make sure your answer is correct!

Thanks!