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(Time allowance: 10 minutes) There is only one question and it is for the replace now decision: What is the NPV of the cash flows for the replace now decision? This is a partial question exam created to give credit for partial work (individual steps in a problem). You are facing the decision of whether to replace an old machine at your factory. A new machine will cost $44 to purchase it now and maintenance expenses will be $6 a year. The new machine has a life of 5 years at which time it is estimated it can be sold for $14. The new machine will be depreciated down to zero over 5 years using straight-line depreciation. If the new machine is purchased, the old machine can be sold today for $40. However, if the old machine is not replaced today, it will continue to be depreciated down to zero using straight-line method over its remaining 4 years. It is estimated that the old machine can be sold for $3 in one year (at the end year 1). The maintenance cost per year for the old machine will be $8. Assume that the discount rate is 10% and the tax rate is 30%. (Time allowance: 10 minutes) There is only one question and it is for the replace now decision: What is the NPV of the cash flows for the replace now decision? This is a partial question exam created to give credit for partial work (individual steps in a problem). You are facing the decision of whether to replace an old machine at your factory. A new machine will cost $44 to purchase it now and maintenance expenses will be $6 a year. The new machine has a life of 5 years at which time it is estimated it can be sold for $14. The new machine will be depreciated down to zero over 5 years using straight-line depreciation. If the new machine is purchased, the old machine can be sold today for $40. However, if the old machine is not replaced today, it will continue to be depreciated down to zero using straight-line method over its remaining 4 years. It is estimated that the old machine can be sold for $3 in one year (at the end year 1). The maintenance cost per year for the old machine will be $8. Assume that the discount rate is 10% and the tax rate is 30%

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