A machine's current book value is $600. The machine cost $1300 three years ago. Operating expenses have been $380 per year, and the machine could last for three more years. Because of a breakthrough in design, a replacement machine would save $300 per year can be purchased for $1000, and has an expected service life of eight years. The scrap value of either machine at any time after installation is $100. If the IRS allows straight-line depreciation over a six-year period for this type of machinery and if an after-tax MARR of 12% is applicable, should the current machine be replaced? The company's tax rate is 52%.

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Yes As machines age the repairs they need will steadily increase in both cost and se... View the full answer