The St. Paul Railroad is considering replacement of a Kalamazoo Power Jack Tamper, used for maintenance of the track, with a new automatic raising device that can be attached to a production tamper.

The current power jack tamper cost $18,000 five years ago and has a total estimated life of 17 years. It can be disposed of now via an outright cash sale for $2,500. There will be no value at the end of twelve years.

The automatic raising attachment has a delivered selling price of $124,000 and an estimated life of twelve years. Estimated residual value at the end of twelve years is $10,000.

Tests have shown that the automatic raising machine will produce a more uniform surface on the track than the power jack tamper now in use. The new equipment will eliminate one labourer whose annual compensation, including fringe benefits, is $30,000.

The salesperson claims that the annual normal maintenance of the new machine will run about $8,000 per year. Records show the annual normal maintenance of the current Kalamazoo machine to be $1,500.

Required -

The cost of capital is 10%. Compute the net present value of the project. Should the St. Paul keep or replace the Kalamazoo Power Jack Tamper?