One year ago, your company purchased a machine used in manufacturing for $$105,000.$ 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 $$45,000$ per year for the next $10$ years.

The current machine is expected to produce a gross margin of $$22,000$ 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 $$9,545$ per year. The market value today of the current machine is $$50,000.$

Your company's tax rate is $40\%,$ and the opportunity cost of capital for this type of equipment is $12\%.$ Should your

company replace its year$-$old machine?