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4. The Merrill Company purchased a lathe machine 3 years ago. They paid $180,000 for the machine and are depreciating it at $20,000 per year. Hence this old machine has accumulated depreciation of $60,000. They had planned to use the lathe machine for 9 years. They have used it for 3 years. Merrill is in the 40% tax bracket. Merrill is considering purchasing a new lathe machine to replace the old lathe machine. The new machine would cost $240,000 and could be depreciated at the rate of $40,000 per year over the next 6 years. The new lathe machine would have a useful life if 6 years. If Merrill purchases the new lathe machine they will sell the old lathe machine for $100,000 The new lathe machine will not increase revenue, but it will decrease operating costs by $35,000 per year. Should Merrill replace the old lathe machine with the new lathe machine? Merrill has a WACC of 12%. Show your work