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Special Instrument company is considering replacing its machine with a new model that sells for $40,000,...

Special Instrument company is considering replacing its machine with a new model that sells for $40,000, the cost of installation is $6,000. The old machine has been fully depreciated and has a $2500 salvage value. The new machine will be depreciated as a 3-year MACRS asset. Revenues are expected to increase $18,000 per year over the 5-year life of the new machine. At the end of 5 years the new machine is expected to have a $1500 salvage value. What is the NPV for this project if Special Instrument has a required rate of return of 12% and a marginal tax rate of 35%? Operating costs are not expected to increase from the current level of $8,000 per year. Briefly Discuss if you accept or reject the new machine and why.

I got the point where I need to calculate the depreication. How do I go about doing that?

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SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 2 years ago
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