The Empire Restaurant is considering an expansion of its dining room. Its pres- ent dish machine, although fully depreciated, is in good working order and able to handle the restaurant's current business. The managers of the Empire estimate that if no changes are made in the restaurant, the present dish machine will last 6 more years before it will have to be replaced because of wear. If the dining room is expanded, however, the managers estimate that the dish ma- chine will have to be replaced in 2 years due to heavy use. Assume that a new dish machine will cost $30,000 whether it is bought 2 years or 6 years from now, that the old dish machine will have no resale value regardless of when it is sold, and the appropriate required rate of return for the investment is 12%.

Required:

Determine in present value terms the Empire’s dollar opportunity cost associ- ated with having to buy the new machine in 2 years rather than in 6 years.