What is the net present value

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Firm G is considering the purchase of a new machine to replace an existing one. The old machine was purchased 5 years ago at a cost of $20,000, and it is being depreciated on a straight line basis to a zero salvage value over a 10-year life. The current market value of the old machine is $14,000. The new machine is depreciated using the following rate of 20, 32, 19, 12, and 11%, it costs $30,000, and Tech plans to sell the machine at the end of the 5th year for $1,000. The new machine is expected to generate before-tax cash savings of $3,000 per year. If the company's tax rate is 40% and the firm's cost of capital is 10% What is the net present value?

Reference no: EM131071727

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