A manufacturing company is considering purchasing a new machine to replace the existing one to improve production efficiency. The new machine will cost the company $200,000 and is expected to sell for $15,000 in ten years. The old machine has a market value of $50,000 today and could be sold for $5,000 in ten years. Both machines have a CCA rate of 30 percent. With the new machine, the company expects savings of $50,000 in operating expenses per year. The companys tax rate is 40 percent and the cost of capital is 15 percent. What is the present value of the incremental CCA tax savings generated by the replacement decision.

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