a company produces a product and has a choice of upgrading or replacing a piece of equipment. The upgrade would cost $23M and have an operating cost per unit of $62,000. Replacing the equipment would cost $38M and would reduce operating costs per unit from the upgrade estimate by 10%. Upgrading would also allow the current machine to be sold for $3M now. Regardless of the choice, the company forecasts sales of 460 units at $80,000 per unit and expects unit sales to grow at 10% per year over the next seven years (selling price and costs would remain the same). Use a WACC of 12% and a re-investment rate of 6% to compare these choices.

What would the cost reduction percent be to change the decision?