Assume that a company is choosing between two alternatives$$keep an existing machine or replace it

with a new machine. The costs associated with the two alternatives are summarized as follows:

Existing

Machine New Machine

Purchase cost $($new$)$ $ $15,000$ $ $22,000$

Remaining book value $ $6,000$

Overhaul needed now $ $5,000$

Annual cash operating costs $ $11,500$ $ $7,000$

Salvage value $($now$)$ $ $2,000$

Salvage value $($eight years from now$)$ $ $1,000$ $ $6,000$

Click here to view and $,$ to determine the appropriate discount factor$($s$)$

using the tables provided.

If the company overhauls its existing machine, it will be usable for eight more years. If it buys the new

machine, it will be used for eight years. Assuming a discount rate of $15\%,$ what is the net present value

of the cash flows associated with keeping the existing machine?