You are given the following present value factors at 9 percent, the Tri-State Glass Company's minimum desired rate of return.

End of Period Present Value of $1 Present Value of an Annuity of $1

1 0.917 0.917

2 0.842 1.759

3 0.777 2.531

4 0.708 3.240

5 0.650 3.890

6 0.596 4.486

The Tri-State Glass Company is considering the replacement of a piece of equipment. The old machine has a book value of $2,000 and a remaining estimated life of four years, with no salvage value at that time. Present salvage value is $750. The new equipment will cost $1,575, including transportation and installation. It has an estimated life of four years, with no salvage value then. Annual cash operating costs are $500 for the old machine and $270 for the new machine. a) Compute the present value of the operating cash outflows for the old machine. b) Compute the present value of the operating cash outflows for the new machine. c) Compute the present value of the cash operating savings if the new machine is purchased. d) What is the net present value of the replacement alternative? e) Should the new machine be purchased? Why?