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XYZ Manufacturing is currently using an outdated lathe to produce custom metal components. The lathe has 6 years of remaining life. If retained, the lathe
XYZ Manufacturing is currently using an outdated lathe to produce custom metal components. The lathe has years of remaining life. If retained, the lathe will have depreciation expenses of $ for years and $ for the sixth year. Its current book value is $ and it can be sold on an online marketplace for $ at this time. If the old lathe is not replaced, it can be sold for $ at the end of its useful life.
is contemplating the purchase of the Precision Lathe a stateoftheart machine, which costs $ and has an estimated useful life of years with an estimated salvage value of $ This lathe falls into the MACRS year class, so the applicable depreciation rates are and The new lathe is more efficient and allows for increased production, resulting in an annual sales increase of $ Additionally, the new machine's improved technology reduces operating expenses by $ per year. To accommodate the higher production volume, the new machine would necessitate an increase in inventories by $ while accounts payable would simultaneously increase by $s marginal federalplusstate tax rate is and the project cost of capital is Should it replace the old lathe?
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