Your cupcake bakery has 10 professional ovens, the oldest of which you're considering replacing. This oven was purchased 7 years ago for $10,000. You are depreciating it over a 10-year life toward a zero salvage value, using straight-line depreciation (the method you use for all of your ovens).This oven costs $2,000/year to operate, and you believe it would continue to run for 5 more years. You could sell it today for $750.The replacement you're considering costs $22,500. You expect that this oven will have a useful life of 5 years (which is also its depreciable life). It would be cheaper to operate than the current oven, costing only $1,000/year to run. While you would depreciate it toward a zero salvage value (your standard practice), you believe it would actually have a market value of $600 after 5 years. Your marginal tax rate is 35% and your required return (your WACC) is 20%.Use NPV to decide whether or not you should purchase the new oven.

Notes:*We will assume, as your book does, that any tax effect from the sale of the old machine happens at t=1(today is t=0, so t=1 is in one period). Likewise, any tax effect from the sale of the "new" machine willoccur one year after its sale.