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Hayden Inc. has a number of copiers that were bought four years ago for $20,000. Currently...

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Finance

Hayden Inc. has a number of copiers that were bought fouryears ago for $20,000. Currently maintenance costs $2,000 a year,but the maintenance agreement expires at the end of two years andthereafter the annual maintenance charge will rise to $8,000. Themachines have a current resale value of $8,000, but at the end ofyear 2 their value will have fallen to $3,500. By the end of year 6the machines will be valueless and would be scrapped.
Hayden is considering replacing the copiers with new machinesthat would do essentially the same job. These machines cost$25,000, and the company can take out an eight-year maintenancecontract for $1,000 a year. The machines will have no value by theend of the eight years and will be scrapped.
Both machines are depreciated by using seven-year MACRS, andthe tax rate is 35%. Assume for simplicity that the inflation rateis zero. The real cost of capital is 7%. When should Hayden replaceits copiers?

Thx! and also please show me how to calculate thedepreciation!

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