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QUESTION

One year ago, your company purchased a machine used in manufacturing for $105,000.

One year​ ago, your company purchased a machine used in manufacturing for 

$105,000. You have learned that a new machine is available that offers many advantages and you can purchase it for 

$155,000 today. It will be depreciated on a​ straight-line basis over 10 years and has no salvage value. You expect that the new machine will produce a gross margin​ (revenues minus operating expenses other than​ depreciation) of 

$40,000 per year for the next 10 years. The current machine is expected to produce a gross margin of 

$24,000 per year. The current machine is being depreciated on a​ straight-line basis over a useful life of 11​ years, and has no salvage​ value, so depreciation expense for the current machine is 

$9,545 per year. The market value today of the current machine is 

$55,000. Your​ company's tax rate is 38 %

and the opportunity cost of capital for this type of equipment is 

11%. Should your company replace its​ year-old machine?

Show detailed steps including how to calculate the after-tax proceeds from the sales including tax savings

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