A company is considering replacing an existing machine with a new machine that will cost 40 million but will reduce the company's operating costs by 5 million and increase revenues by 6 million each year for the four years of its estimated life. This new machine will be depreciated to zero over that period using straight-line depreciation but is expected to have a 5 million salvage value. The old machine has an existing book value of 12 million and it is being depreciated to zero over its remaining four-year life. If sold today, the machine is worth is 10 million. If it is not replaced, in four years it can be sold for 1 million. The company's tax rate is 40 percent and its weighted average cost of capital and cost of equity are 8.0 percent and 12.5 percent, respectively. Using a discounted net present value (NPV) approach, the company will most likely determine that the replacement project's NPV is:

Question 11 options:

negative.

greater than 0 but less than 4 million.

greater than 4 million.