Replacement analysis

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Replacement analysis

St.Johns River Shipyards is considering the replacement of an 8-year-old riveting machine with a new one that will increase earnings before depreciation from $24,000 to $44,000 per year. The new machine will cost $90,000, and it will have an estimated life of 8 years and no salvage value. The new machine will be depreciated over its 5-year MACRS recovery period; so the applicable depreciation rates are 20%, 32%, 19%, 12%, 11%, and 6%. The applicable corporate tax rate is 40%, and the firm's WACC is 10%. The old machine has been fully depreciated and has no salvage value.

What is the NPV of the project? Round your answer to the nearest cent. Negative amount should be indicated by a minus sign. $  

Should the old riveting machine be replaced by the new one?

-Select-Yes No

Reference no: EM131811032

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