Try this problem on for size:
The Lancen is dancing on the boat Corp has an old machine with a cost of $800,000 and a useful life of 5 years and accumulated depreciation of $600,000. The company elected to use straight line for tax purposes and will continue to depreciate $40,000 per year for the next five years. The annual cash operating expenses of the machine is $293,000. They could sell the machine today for $219,000 and think they can sell it at the end of five years for $47,000.

They have an opportunity to purchase a new machine for $900,000; that would reduce annual cash operating expenses to $71,000 per year, and would have a 5-year useful life and a salvage value of $201,000. The company would use 5 yr MACRS to depreciate the property. The company has a tax rate of 42% and a hurdle (required) rate of 18% for similar investments.

Should they continue to use the old machine or buy the new machine?