DISCUSS QUESTION #4 The Oxford Equipment Company purchased a machine 5 years ago at a cost of $85,000. The machines expected life is 10 years and is being depreciated by the straight-line method at a rate of $8,500 per year. If the machine is kept, it can be sold for $15,000 at the end of its expected life. A new machine can be purchased for $170,000. It has an expected life of 5 years and will reduce cash operating expenses by $40,000 per year. Sales will not change. At the end of its useful life, the machines estimated value is zero. The new machine is eligible for 100% bonus depreciation at the time of purchase. The old machine can be sold today for $55,000. The tax rate is 25% and the appropriate WACC is 9%

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Cash Flow Per Year:
PV @16%
NPV=
Should the machine be purchased?