The Gilbert Instrument Corporation is considering replacing the wood steamer it currently

uses to shape guitar sides. The steamer has 6 years of remaining life. If kept, the steamer will

have depreciation expenses of $650 for 5 years and $325 for the sixth year. Its current book

value is $3,575, and it can be sold on an Internet auction site for $4,150 at this time. If the

old steamer is not replaced, it can be sold for $800 at the end of its useful life.

Gilbert is considering purchasing the Side Steamer 3000, a higher-end steamer, which

costs $12,000 and has an estimated useful life of 6 years with an estimated salvage value of

$1,500. This steamer falls into the MACRS 5-year class, so the applicable depreciation rates

are 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, and 5.76%. The new steamer is faster and

allows for an output expansion, so sales would rise by $2,000 per year; the new machine's

much greater efficiency would reduce operating expenses by $1,900 per year. To support the

greater sales, the new machine would require that inventories increase by $2,900, but

accounts payable would simultaneously increase by $700. Gilbert's marginal federal-plus-

state tax rate is 40%, and the project cost of capital is 15%. Should it replace the old steamer?

St. Johns River Shipyard's welding machine is 15 years old, fully depreciated, and has no

salvage value. However, even though it is old, it is still functional as originally designed

and can be used for quite a while longer. A new welder will cost $182,500 and have an

estimated life of 8 years with no salvage value. The new welder will be much more

efficient, however, and this enhanced efficiency will increase earnings before depreciation

from $27,000 to $74,000 per year. The new machine will be depreciated over its 5-year

MACRS recovery period, so the applicable depreciation rates are 20.00%, 32.00%, 19.20%,

11.52%, 11.52%, and 5.76%. The applicable corporate tax rate is 40%, and the project cost

of capital is 12%. Should the old welder be replaced by the new one?

Can someone please help, my answer keeps coming out wrong and I want to understand how to get the answer step by step so that I an complete the other questions. Thank you in advance.