The XYZ Manufacturing company is currently manufacturing its product on a machine that is fully depreciated for tax purposes and that has a book walue of $10,000 (It was purchaed for $30,000 20 years ago). The costs of the product are as follows.

I am sorry the photos are out of order, the one below should go first. Not sure how to edit it.

Question I need answers to:

a- Should the equipment be acquired?

b- If the product can be purchased at a cost of $7.80 per unit from a reliable supplier, should it be purchased or made? Explain.

Thank you!

ANNUAL EQUIVALENT COSTS AND REPLACEMENT The old machine could be sold on the open market now for $5,000. ears from now it is expected to have a salvage value of $1,000. Ten y Th e new machine has an expected life of ten years and an expected salvage of $10,000. The current corporate income tax rate is o.40, and the capital gain tax rate is 0:25. Any salvage from sale will result in a capital gain at the time of retirement. (For tax purposes, the entire cost may be depreciated in ten years using straight-line depreciation.) The appropriate after-tax time discount rate for this project is 0.10. It is expected that future demand of the product will stay steady at 1,000 units per year. a Should the equipment be acquired? b If the product can be purchased at a cost of $7.80 per unit from a reliable supplier, should it be purchased or made? Explain. ANNUAL EQUIVALENT COSTS AND REPLACEMENT The old machine could be sold on the open market now for $5,000. ears from now it is expected to have a salvage value of $1,000. Ten y Th e new machine has an expected life of ten years and an expected salvage of $10,000. The current corporate income tax rate is o.40, and the capital gain tax rate is 0:25. Any salvage from sale will result in a capital gain at the time of retirement. (For tax purposes, the entire cost may be depreciated in ten years using straight-line depreciation.) The appropriate after-tax time discount rate for this project is 0.10. It is expected that future demand of the product will stay steady at 1,000 units per year. a Should the equipment be acquired? b If the product can be purchased at a cost of $7.80 per unit from a reliable supplier, should it be purchased or made? Explain