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AJAX Corporation is considering replacing their old machine with a new one. The old machine has...

AJAX Corporation is considering replacing their old machine with a new one. The old machine has 5 years of remaining life. The old machine has depreciation expenses of $500 per year for the remaining life. It can be sold for $4000 right now. If kept, it has no salvage value at the end of its life. The new machine which has a 5-year life costs $10,000 to purchase. The new machine falls into the MACRS 5-year class with the appreciation rates of 20.00%, 32.00%, 18.00%, 15% and 15%. The new machine will increase sales by $4000 per year. AJAX’s tax rate is 40% and they use 10% discount rate. Should they replace the old machine?

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

jeff jeffy answered 1 year ago
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