What is the npv of replacing the old machine

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Question: The "Car Clean" company operates a car wash business. The company bought a machine 2 years ago at the price of $60,000. The life span of the machine is 6 years and the machine has no disposal value, the current market value of the machine is $20,000. The company is considering buying a new machine. The cost of the new machine is $100,000 and its life span is 4 years. The new machine has a disposal value of $20,000. The new machine is faster then the old one; thus the company believes the revenue will increase from $1 million annually to $1.03 million. In addition the new machine is expected to save the company $10,000 in water and electricity costs. The discount rate of "Car Clean" is 15% and the corporate tax rate is 40%. What is the NPV of replacing the old machine?

Reference no: EM131477069

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