The company purchase a machine 5 years ago. The machine had an expected life of 10 years at the time of purchase, and it is being depreciated by the straight-line method by $5500 per year. If the machine is not replaced, it can be sold for $20,000 at the end of its useful life. A new machine can be purchased for $55,000, including installation costs. During its 5-year life, it will reduce cash operating expenses by $30,000 per year. Sales are not expected to change. At the end of its useful life, the machine is estimated to be worthless. The applicable depreciation rates are 33% 45%, 15% and 7%. The old machine can be sold today for $35,000. The firm's tax rate is 35%, and the appropriate WACC is 16%.

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