CPL Ltd is considering the purchase of a new machine to replace an old machine. Selected cost data pertaining to the two machines is provided below:

At the end of four years, the company plans to discontinue the product line for which the machines are used. Income taxes can be ignored. Calculate the net present value of the new machine, if CPL Ltd's hurdle rate is 12 per cent.

Purchase price Accumulated depreciation in four years Current disposal value Estimated disposal value in four years Annual operating costs Old $12,500 $12,500 $3,800 $0 $4,500 New $11,000 $11,000 $2,500 $2,500