The Taylor Corporation is using a machine that originally cost $66,000. The machine has a book value of $66,000 and a current market value of $40,000. The asset is in the Class 8 CCA pool. It will have no salvage value after 5 years and the company tax rate is 40%. Jacqueline Elliott, the Chief Financial Officer of Taylor, is considering replacing this machine with a newer model costing $70,000. The new machine will cut operating costs by $10,000 each year for the next five years. Taylor's cost of capital is 8%.

Should the firm replace the asset? (Use NPV methodology to solve this problem.)

Calculate the Present Values of the followings:

1. Total cashflows in year 0:

($30,000)

($70,000)

($40,000)

$30,000

2. Total Annual Savings for the five years:

$23,956

$25,789

$45,378

$11,289

3. PV CCA:

$8,229

$7,963

$9,365

$10,345

How to do question 2 and 3?