What is the npv to replace the year-old machine

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One year ago, your company purchased a machine used in manufacturing for $90,000. A new machine is available and you can purchase it for $150,000 today. It will be depreciated on a straight-line basis over ten years without salvage value. You expect that the new machine will produce a gross margin? (revenues minus operating expenses other than? depreciation) of $35,000 per year for the next ten years. The current machine is expected to produce a gross margin of $24,000 per year. The depreciation expense for the current machine is $8,182 per year. The market value today of the current machine is $50,000. Your company's tax rate is 38%, and the opportunity cost of capital is 10%.

Problem 1: What is the NPV to replace the year-old machine?

Reference no: EM132760963

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