Calculate the NPV of the replacement analysis

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The Chang Company is considering the purchase of a new machine to replace an obsolete one. The machine being used for the operation has a book value and a market value of zero. However, the machine is in good working order and will last at least another 5 years. The proposed replacement machine will perform the operation so much more efficiently that Chang's engineers estimate that it will produce after-tax cash flows (labor savings and depreciation) of $11,600 per year. The new machine will cost $34,800 delivered and installed, and its economic life is estimated to be 5 years. It has zero salvage value. The firm's WACC is 8.20%, and its marginal tax rate is 40%. Calculate the NPV of the replacement analysis?

Reference no: EM132028627

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