The Hilltop Corporation is considering the replacement of an old machine that is currently being used. The old machine is fully depreciated but can be used by the corporation for3years. If Hilltop decides to replace the old machine, Baker Company has offered to purchase it for $50,000. The disposal value of the old machine would be zero in3years. Hilltop uses the straightline method of depreciation for all classes of machinery.

If the replacement occurs, a new machine would be acquired from Busby Industries. The purchase price of $500,000 for the new machine would be paid in cash at the time of replacement.Due to the increased efficiency of the new machine, estimated annual cash savings of $150,000 would be generated eachyear. The new machine is expected useful life of three years. The new machine is expected to have a zero disposal price.

All operating cash receipts, operating cash expenditures, and applicable tax payments and credits are assumed to occur at the end of the year. Hilltop employs the calendar year for reporting purposes.

Determine the following:

• If Hilltop requires investments to earn an 8% return, the net present value for replacing the old machine with the new machine? ( Ignore taxes)
• IfHilltopissubjecttoanincometaxrateof30%,thenetpresentvalueforreplacingtheoldmachinewiththenewmachine?