WWF purchased a apparatus 5 years ago at a cost of $100,000. It had an estimated life of 10 years at the stretch of purchase and a probable salvage value of $10,000 at the end of the 10 years. It has been depreciated by the straight line method toward a salvage value of $10,000.

Another new apparatus can be purchased for $150,000, with fitting costs. Over its 5 year life, it ought to decrease cash operating expenses by $50,000 per year. Sales are not likely to change. At the end of its useful life, the machine is projected to be useless.Straight line method of depreciation will be used with no salvage value.

The old machine can be sold today for $65,000. The firm's tax rate is 34 percent. The appropriate discount rate is 15 percent.

Required

1. What is the NPV of this project? Should the firm replace the old machine?