One yearago, your company purchased a machine used in manufacturing for $ 120 comma 000

$120,000. You have learned that a new machine is available that offers many advantages and you can purchase it for $ 160 comma 000

$160,000 today. It will be depreciated on astraight-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 thandepreciation) of $ 55 comma 000

$55,000 per year for the next 10 years. The current machine is expected to produce a gross margin of $ 25 comma 000

$25,000 per year. The current machine is being depreciated on astraight-line basis over a useful life of 11years, and has no salvagevalue, so depreciation expense for the current machine is $ 10 comma 909

$10,909 per year. The market value today of the current machine is $ 65 comma 000

$65,000. Yourcompany's tax rate is 35 %

35%, and the opportunity cost of capital for this type of equipment is 12 %

12%. Should your company replace itsyear-old machine?