Chapter 15 Supplementary Problem #1 Quincy Company is using a machine that cost $150,000 five yeas 8the straight current market value is $15,000. The machine has been depreciated urchase a basis over a 10 year life. Its salvage value is zero. Managem over a b new machine at a cost of $180,000. This machine would bedepleoreciation) a year life with a $30,000 salvage value. Cost savings (excludino Assume expected to be $35,000 a year. The initial investment is $141. tax rate and a cost of capital of 12%. Its can purchase a preciated over a 5 a 4 0% ,000. Ass Required (1) Compute the change in annual cash infl ows associated with the purchase of the new machine. (2) Compute the net present value of purchasing the new machine (3) Should the company purchase the new machine? Why or why not? (4) Assume the old machine had a $10,000 salvage value. Recompute th the net present value. Ignore the salvage value annual cash inflows. effects on depreciation and (5) Using the data from part 2, compute the profitability index for the project (6) Using the profitability index criteria, should the project be accepted or rejected