St. Johns River Shipyards is considering the replacement of an
8-year-old riveting machine with a new one that will increase
earnings before depreciation from $27,000 to $48,000 per year. The
new machine will cost $87,500, and it will have an estimated life
of 8 years and no salvage value. The new machine will be
depreciated over its 5-year MACRS recovery period, so the
applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%.
The applicable corporate tax rate is...