Kern Industries is considering the replacement of an older technology with new technology that will have a capitalized base of $44,500,000. The older technology, having a remaining six-year useful life (operating life and accounting life) with no anticipated salvage value under a straight-line depreciation method, currently has a book value of $12,000,000 and is believed to be marketable at book. Under the current tax system, the new equipment purchase qualifies for the five-year MACRS depreciation rates, has no allowable investment tax credit, and has an operating life of six years. Further, the company projects that over the six-year life of the new machine, the company will increase revenues by $15,000,000 in the first year and expenses by only $2,000,000 in the first year in each subsequent year, revenues will increase by 5% and expenses are expected to increase by 8%. In addition, the company plans to invest an additional $1,000,000 in working capital (immediately) and estimates that it will have to increase (each year) its working capital investment (inventory, accounts receivable, etc.) by 6% of the increase in revenues. Throughout, the marginal corporate tax rate is expected to remain at 34%. If the firms cost of capital is 12%, what is the value of the technology to this company and should it make this investment? The obvious questions are whether this is a profitable or valuable investment; and, how does one measure the value in order to make such a decision?