Taylor Corporation currently uses an injection-moulding machine that was purchased 2 years ago. The CCA rate on this machine is 30%. Currently, it can be sold for $2,500. If this old machine is not replaced, it is not expected to have any value at the end of its useful life, estimated to be 6 years from now.

Taylor is offered a replacement machine that has a cost of $12,000, an estimated useful life of 6 years, and an estimated salvage value of $1,200. The CCA rate on this machine is also 30%. The replacement machine would permit an output expansion, so sales would rise by $1,400 per year; also, the new machine's much greater efficiency would reduce operating expenses by $1,500 per year. The new machine would require that inventories be increased by $3,000, but accounts payable would simultaneously increase by $1,000. Taylor's tax rate is 30% and its WACC is 12%. Should the company replace the old machine?