victor : Ronald W . Spahn Name : Scott Parham A hard copy is due on or before the or before the beginning of the in-class part of the final exam on Tuesday , December 11 , 2018 . You are expected to complete this exa collaborating with other class members xam without You recently began working for Orange Fizz Company and manager gement is contemplating the replacement of its existing , three - year old bottling machines that originally cost $14 000 ,000 with newer and more efficient machines . The old , existing machines , were placed on the MACRS five- year class life depreciation schedule ( assuming half - year convention ) three- yea years ago . Total operating costs for the old bottling machines at es are $5 400,000 per year and Orange Fizz will bottle 48 million ( 48000,000 ) bottles per year I year each year for the next seven years . The firm expects to realize a $1 000 ,100 return from salvaging the old machines in 7 years ; however , the ever . the existing machines may be sold now to another firm in the industry for $2 200 000 . If Orange Fizz retains the old machines , they would remain operational for the next 7 - years The new bottling machines , if purchased , would cost $16 000 000 and would b placed on a MACRS five - year class life depreciation and will remain in operation for the next 7 years . The new machines are expected to have a salvage value of $1 600 000 in seven years . Total annual savings in operating costs of 80.076 per bottle will b realized if the new bottling machines are installed . The company is in the 26% income ax bracket and it has a 120 % WACO Determine if the replacement should occur by estimating the replacement project's PV and RR . Use a relative ( incremental ) cash flow analysis similar to what We did in class and the example problems in your text