(Incremental cash flows and NPV) Johnsonamp;Johnson currently has a machine that has five years of useful life remaining.

B4. (Incremental cash flows and NPV) Johnson&Johnson currently has a machine that has fiveyears of useful life remaining. Its current net book value is $50,000, and it is being straightlinedepreciated to its expected zero salvage value in five years. It generates $60,000 per yearin sales revenue, requiring $30,000 in operating expenses, excluding depreciation. If thefirm sells the machine now, it could get $30,000 for it. The firm is considering buying a newmachine to replace this one. The new machine will have a useful life of five years and a salvagevalue of $5,000. It costs $65,000. It is expected to generate $70,000 in sales revenueand require $25,000 in operating expenses annually, excluding depreciation. The project’scost of capital is 10%, the firm will use straight-line depreciation to $5,000 over five years,and the relevant tax rate is 40%. Compute the NPV from replacing the old machine.