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Problem 1 2 . 1 1 ( Replacement Analysis ) St . Johns River Shipyards is considering the replacement of an 8 - year -

Problem 12.11(Replacement Analysis)
St. Johns River Shipyards is considering the replacement of an 8-year-old riveting machine with a new one that will increase earnings before depreciation from
$30,000 to $56,000 per year. The new machine will cost $87,500, and it will have an estimated life of 8 years and no salvage value. The new riveting machine is
eligible for 100% bonus depreciation at the time of purchase. The applicable corporate tax rate is 25%, and the firm's WACC is 14%. The old machine has been
fully depreciated and has no salvage value.
What is the NPV of the project? Negative value, if any, should be indicated by a minus sign. Round your answer to the nearest cent.
$
Should the old riveting machine be replaced by the new one?
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