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d. Should the machine be purchased? Explain your answer. 12-10 REPLACEMENT ANALYSIS The Dauten Toy Corporation currently uses an injection mo machine that was purchased 2 years ago. This machine is being depreciated on a straight basis, and it has 6 years of remaining life. Its current book value is $2,100, and it can be for $2,500 at this time. Thus, the annual depreciation expense is $2,100/6 = $350 per the old machine is not replaced, it can be sold for $500 at the end of its useful life. Dauten is offered a replacement machine which has a cost of $8,000, an estimated useful life of 6 years, and an estimated salvage value of $800. This machine falls into the MACRS 5-year class so the applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%. The replacement machine would permit an output expansion, so sales would rise by $1,000 per year; even so, the new machine's much greater efficiency would cause operating expenses to decline by $1,500 per year. The new machine would require that inventories be increased by $2,000, but accounts payable would simultaneously increase by $500. Dauten's marginal federal-plus-state tax rate is 40%, and its WACC is 11%. Should it replace the old machine? DE LA CEMERIT ANAI VEICO Tahne Divrar Chinwarde is enncidering the renlacement of a