The XANDAR Company is considering acquiring a machine from OPULENT Corporation for $440,000.

The machine will automate a process currently performed manually. The introduction of the machine will

allow XANDAR to avoid paying annual salaries and benefits over the life of the project, during which

salaries and benefits are not expected to grow. No other revenues or expenses will be affected except for

those related to the jester hats (described below).

The machine will occupy floor space currently being used to make jester hats that contribute $55,000 per

year to XANDAR's before-tax cash flow. If XANDAR acquires the machine from OPULENT, it would have

to discontinue making the jester hats. XANDAR has already spent $9,500 to assemble all of the estimates

described herein.

The project is expected to last for six years. However, the machine must be depreciated by the

straight-line method over an eight-year life to a zero salvage value for income tax purposes. At the end of

the project, XANDAR expects to be able to sell the machine for $48,500, net of disposal costs. This

amount will fall to $20,700 by year eight.

Required:

Assuming that the appropriate after-tax hurdle rate (cost of capital) is thirteen percent, what is the minimum

amount of equal annual before-tax savings from salaries and benefits that XANDAR needs in order to

justify acquiring the machine from OPULENT? The relevant income tax rate is 30%.