One year ago, your company purchased a machine used in manufacturing for $90,000.You have learned that a new machine is available that offers many advantages and you can purchase it for $150,000 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 $60,000 per year for the next 10 years. The current machine is expected to produce a gross margin of $25,000 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 $8,182 per year. The market value today of the current machine is $5,000. Your company's tax rate is 42 %,and the opportunity cost of capital for this type of equipment is 10 %. Should your company replace its machine?

a. Yes. With an NPV of $32,577, there is a profit from replacing the machine.

b. Yes. With an NPV of $42,688, there is a profit from replacing the machine.

c. Yes. With an NPV of $52,797, there is a profit from replacing the machine.

d. No. With an NPV of -$2,797, there is a loss from replacing the machine.

e. No. With an NPV of -$22,973, there is a loss from replacing the machine.