Wahoo Rendering is planning for the replacement of a battery of 5 Expeller presses which are used to separate tallow from meat and bone meal. Anderson
International has offered to sell the firm 5 brand new Mega 200 Expeller presses for $120000. The specifications for the Mega 200 include a case hardened worm
assembly and a double reduction gearbox. The new presses can be depreciated to a zero salvage value over 4 years using straight-line depreciation. If the
required yearly maintenance with a total yearly cost of $10000 is performed on schedule at the end of each year the new presses will have an economically
useful life of 10 years. The projected future maintenance costs and salvage values for the 5 older Expeller presses currently in use are
YEAR; Before Tax Maintenance; After Tax Salvage
0; $8000 ; $24000
1; 15000; 19800
2; 20000; 13200
3; 40000; 6600
Wahoo Rendering has a 40% corporate tax rate and a required return of 10%. Assuming the purchase price and maintenance costs for a new Mega 200 Expeller press
will remain constant determine when the old presses should be replaced.