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 and you can purchase it for

$145,000

today. It will be depreciated on a straight-line basis over 10 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

$50,000

per year for the next 10 years. The current machine is expected to produce a gross margin of

$21,000

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

$50,000.

Your company's tax rate is

45%,

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

11%.

What is the NPV of replacing the year-old machine?

(Round to the nearest dollar.)The Should your company replace its year-old machine?

P 9-17 (similar to) Question Help 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 and you can purchase it for $145,000 today. It will be depreciated on a straight-line basis over 10 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 $50,000 per year for the next 10 years. The current machine is expected to produce a gross margin of $21,000 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 $50,000. Your company's tax rate is 45%, 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.) Enter your answer in the answer box and then click Check Answer. ? 1 part Clear All Check Answer remaining