A farmer is considering replacing a labor-intensive machine system with a more capitalintensive one. Adopting the new system is estimated to increase machinery operating expenses by $21,000 per year and to replace one hired laborer, whose annual salary is $26,000. The new machinery costs $30,000; however, the trade-in value of the old system is $10,000. Adopting the new machinery will increase annual depreciation by $4,000. Further data indicate an eight-year planning horizon, zero salvage value, a 20% tax rate. The farms equity to asset ratio is 0.8. Debt cost is 6% and equity cost 10%. Assume the farmer wants to keep his current financial structure. Please help the farmer decide if he should make the replacement.