Bleefl Corporation manufactures furniture in several divisions, including the patio furniture division. The manager of the patio furniture division plans to retire in 2 years. The manager receives a bonus based on the division's ROI, which is currently 12%. One of the machines that the patio furniture division uses to manufacture the furniture is rather old, and the manager must decide whether to replace it. (Click the icon to view information on the replacement decision.) Read the requirements. Requirement 1. Should Bleefl Corporation replace the machine? Why or why not? Bleefl would be better off if they replace the machine. Its cost of capital and the IRR of the investment indicate that this is a net present value project. More Info The new machine would cost $40,000 and would last 10 years. It would have no salvage value. The old machine is fully depreciated and has no trade-in value. Bleefl uses straight-line depreciation for all assets. The new machine, being new and more efficient, would save the company $7,000 per year in cash operating costs. The only difference between cash flow and net income is depreciation. The internal rate of return of the project is approximately 12%. Bleefl Corporation's weighted-average cost of capital is 6%. Bleefl is not subject to any income taxes. Print Done