The Pioneer Company is evaluating the replacement of one of its machines. The machine was originally purchased ten years ago at a cost of $50,000 and has been depreciated to a book value of zero. If Pioneer replaces the machine, it will be able to bid on larger projects that require the capabilities of the new machine. The new machine will cost the firm $70,000, which will be depreciated over 5 years according to the following depreciation rates: 30% in year 1, 20% in each of years 2 and 3, and 15% in each of years 4 and 5. The new machine qualifies for an immediate 2% investment tax credit. Pioneer anticipates that at the end of the machine's eight year economic life it will be sold for $8,000. Pioneer estimates that its existing machine can be sold today for $4,000. If Pioneer does not replace the machine, it anticipates being able to use the existing machine for eight more years at which time its salvage value would be zero. Without the purchase of the new machine, Pioneer expects to generate revenue of $210,000 per year. How would they can generate such Revenue?

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To calculate the revenue generated by Pioneer using their existing machine f... View the full answer