A Firm Is Considering the Cost-Saving Project of Replacing an Existing

Essay

A firm is considering the cost-saving project of replacing an existing copier with a new copier. The existing copier was purchased 8 years ago for $100,000 and was expected to last 20 years over which straight-line depreciation was used. This existing copier can now be sold for $10,000. The new machine costs $120,000, will last 12 years, and is expected to save the firm $20,000 each year before taxes. Assuming a tax rate of 34%, a discount rate of 10% and zero salvage for the new machine at the end of its life, what is the NPV for this project?