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One year ago, your company purchased a machine used in manufacturing for $ 1 0 8 , 9 0 0 . You have learned that
One year ago, your company purchased a machine used in manufacturing for $ You have learned that a new machine is available that offers many advantages and you can purchase it for $
today. It will be depreciated on a straightline basis over 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 $ per year for the next years. The current machine is expected to produce a gross margin of $ per year. The current machine is being depreciated on a straightline basis
over a useful life of years, and has no salvage value, so depreciation expense for the current machine is $ per year. The market value today of the current machine is $ Your company's tax rate is
and the opportunity cost of capital for this type of equipment is Should your company replace its yearold machine?
The NPV of replacing the yearold machine is $
Round to the nearest cent.
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