Healthy Home Co. is considering replacing a machine used in manufacturing its alcohol-free hand sanitizer.

The new machine will cost $170,000 and has an expected life of 4 years. At the end of this period, the machine will have a salvage value of $30,000.

The tax value of the old machine is $4,375 while its current market value is $12,000. There will be no salvage value on the old machine in 4 years.

The CCA rate on both machines is 30 percent.

The new machines efficiency will result in cost savings by decreasing production costs by $0.10 per bottle produced. Production of the hand sanitizer is expected to be relatively stable at 320,000 bottles per year for the next 4 years.

The companys corporate tax rate is 35 percent and they have a 12 percent cost of capital. The risk of this investment is the same as the firms overall level of risk.

Required (show all of your calculations):

a) Calculate the net present value for the machine replacement. (Round cash flows to the nearest whole dollar where applicable.)

b) Should Healthy Home Co. replace the current machine?