A company plans to replace 4 years old equipment that is still in use. The original investment for 4-year equipment was $50000, with a scrap value of $2000 and 10-year depreciation calculated using the straight-line method. It can now be sold for $6,000. New equipment can be installed for $60,000, saving the company $10,000 a year in operating expenses. 10-year straight-line depreciation with no salvage value applies to new equipment. The income tax rate is 35%. All costs other than depreciation are the same for both equipment. The company wants a 15% after-tax return on the capital invested for such a project. Should the replacement be done at this time?

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