One year ago, your company purchased a machine used in manufacturing for $ 110 000$110 000 You have learned that a new machine is available that offers many advantages you can purchase it for $ 155 000$155 000 today It will be depreciated on a straight line basis over ten years and has no salvage value You expect that the new machine will produce a gross margin (revenues minus operating expenses other than depreciation) of $ 40 000$40 000 per year for the next ten years The current machine is expected to produce a gross margin of $ 24 000$24 000 per year The current machine is being depreciated on a straight line basis over a useful life of 11 years, and has no salvage value, so depreciation expense for the current machine is $ 10 000$10 000 per year The market value today of the current machine is $ 55 000$55 000 Your company's tax rate is 35 35 , and the opportunity cost of capital for this type of equipment is 11 11 Should your company replace its year old machine One year ago, your company purchased a machine used in manufacturing for $110 000 You have learned that a new machine is available that offers many advantages you can purchase it for $155 000 today It will be depreciated on a straight line basis over ten years and has no salvage value You expect that the new machine will produce a gross margin (revenues minus operating expenses other than depreciation) of $40 000 per year for the next ten years The current machine is expected to produce a gross margin of $24 000 per year The current machine is being depreciated on a straight line basis over a useful life of 11 years, and has no salvage value, so depreciation expense for the current machine is $10 000 per year The market value today of the current machine is $55 000 Your company's tax rate is 35 , and the opportunity cost of capital for this type of equipment is 11 Should your company replace its year old machine The NPV of replacing the year old machine is $ (Round to the nearest dollar )

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One year ago, your company purchased a machine used in manufacturing for $ 110 000$110 000. You have learned that a new machine is available

One year ago, your company purchased a machine used in manufacturing for

$ 110 000$110 000.

You have learned that a new machine is available that offers many advantages; you can purchase it for

$ 155 000$155 000

today. It will be depreciated on a straight-line basis over ten years and has no salvage value. You expect that the new machine will produce a gross margin (revenues minus operating expenses other than depreciation) of

$ 40 000$40 000

per year for the next ten years. The current machine is expected to produce a gross margin of

$ 24 000$24 000

per year. The current machine is being depreciated on a straight-line basis over a useful life of 11 years, and has no salvage value, so depreciation expense for the current machine is

$ 10 000$10 000

per year. The market value today of the current machine is

$ 55 000$55 000.

Your company's tax rate is

35 %35%,

and the opportunity cost of capital for this type of equipment is

11 %11%.

Should your company replace its year-old machine? image text in transcribed

One year ago, your company purchased a machine used in manufacturing for $110 000. You have learned that a new machine is available that offers many advantages; you can purchase it for $155 000 today. It will be depreciated on a straight-line basis over ten years and has no salvage value. You expect that the new machine will produce a gross margin (revenues minus operating expenses other than depreciation) of $40 000 per year for the next ten years. The current machine is expected to produce a gross margin of $24 000 per year. The current machine is being depreciated on a straight-line basis over a useful life of 11 years, and has no salvage value, so depreciation expense for the current machine is $10 000 per year. The market value today of the current machine is $55 000. Your company's tax rate is 35%, and the opportunity cost of capital for this type of equipment is 11%. Should your company replace its year-old machine? The NPV of replacing the year-old machine is $ . (Round to the nearest dollar.)