The Winter Corporation has been using their current snow machine for 4 years and it originally cost $500,000.

The machine is being depreciated using the 5-year MACRS category. Winter can sell their current machine for $374,000.

The Chief Financial Officer of Winter is considering replacing this machine with a newer model costing $680,000.

The new machine will save $75,000 each year for the next six years. The new machine is in the 5-year MACRS category as well.

Winter Corporation is in the 28% tax bracket and has a 7% cost of capital. Answer the questions below (a,b,c,&d) (50 points):

a.) What is the net cost of the new machine?

b.) What is the total incremental depreciation on the new versus the old machine?

c.) What is the total annual benefit of the new machine?

d.) What is the net present value of the new machine and should they purchase it, why or why not?