One year ago, your company purchased a machine used in manufacturing for $ 115,000 . You have learned that a new machine is available that offers many advantages and you can purchase it for $ 170,000 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 $ 35,000 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 $ 10,455 per year. The market value today of the current machine is $ 55,000 . Your company's tax rate is 38 % , and the opportunity cost of capital for this type of equipment is 12 % . Should your company replace its year-old machine?

a. The NPV of replacing the year-old machine is $__(Round to the nearest dollar)

b. Should your company replace its year-old machine?

No, there is a profit loss from replacing

Yes, there is a profit