Question 10 A company is considering the replacement of an old machine with a new machine. The old machine was purchased 3 years ago for $15,000. Additional information relating to these machines is as follows (all cash flows are expressed in real terms): Old Machine $6,000 8 years Item Market Value (now) Service Life (when purchased) Residual Value in 5 years' time Net operating revenue per year Net operating expense (other than depreciation) per year Depreciation method New Machine $10,000 5 years $2,500 $2,200 $500 $1,500 $800 $950 Straight line Straight line The real required rate of return is 6 percent per annum, and the anticipated inflation rate is 3 percent per annum. Calculate the net present value of replacing the old machine with the new machine. Company tax rate = 30%