You are thinking of buying a new machine for your business. The cost of the new machine is $50,00 and it will have a depreciable life of 5 years. This machine will save you $10,000 a year in operating costs. Your firm uses straight line depreciation. Has a 10% minimum required return and a 40% tax rate.. This machine will have a $5,000 salvage value. The old machine you would replace originally cost $30,000, had a 5- year life and $0.00 salvage value. You could sell it today for $4,000.

Should you buy the new machine? If so, why?