Advanced Electronics Corporation is considering purchasing a new packaging machine to replace a fully depreciated packaging that will last five more years. The new machine is expected to have a five-year life and depreciation charges of $4,000 in year 1; $6,400 in year 2; $3,800 in year 3; $2,400 in both year 4 and year 5; and $1,000 in year 6. The firm's estimates of revenues and expenses (excluding depreciation) for the new and the old packging machines are shown in the following table. Advanced Electronics is subject to a 40% tax rate on ordinary income.

	New Packaging Machine		Old Packaging Machine	)
Year	Revenue	Expenses (excluding depreciation)	Revenue	Expenses (excluding depreciation
1	50,000	40,000	45,000	35,000
2	51,000	40,000	45,000	35,000
3	52,000	40,000	45,000	35,000
4	53,000	40,000	45,000	35,000
5	54,000	40,000	45,000	35,000

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