Problem 6 I will be using a BAII Plus calculator to answer not excel

Baton Rouge Shipyards is considering the replacement of an old riveting machine with a new one that will increase earnings before depreciation from $27,000 to $54,000 per year. As a result both inventories and accounts receivable will increase by $2000 each, while accounts payable will increase by only $1000. The new machine will cost $82,500, and it will have an estimated life of 8 years and no salvage value. The new machine will be depreciated over its 5 year MACRS recovery period. The applicable corporate tax rate is 40 percent, and the firm's cost of capital is 12 percent. The old machine was purchased 3 years ago and has 8 years of useful life remaining. Its original cost was $50,000 and it is being depreciated using a 5 year MACRS recovery period. If sold now this old machine is estimated to be worth about $30,000. If however, Baton Rouge opts to use it for another 8 years the market value will be reduced to $1000 only. Should Baton Rouge replace the old machine?