Dolfin Juice is considering purchasing a new juice bottling machine to

replace an existing one. The new machine will cost $$350000,$ with a further

$$10000$ to install, and has a useful life of $4$ years. If the new machine is

acquired, current asset will increase by $$40000,$ and current liabilities will

increase by $$25000.$ It has no scrap value at the end of useful life.

The existing bottling machine was purchased $3$ years ago, at a cost of $$300$

$000.$ It has $4$ years of useful life remaining. The machine is depreciated using

a straight line method, and can currently be sold for $$80000$ without

incurring any removal or cleanup cost.

The revenues and expenses $($excluding depreciation and interest$)$ associated

with the new and old machines are given in the table below.

The company has a cost of capital of $10\%$ per annum.

a$)$ Calculate the Net Present Value $($NPV$)$ if Dolfin Juice continues to

operate the old machine.

b$)$ Determine the initial investment associated with the purchase of the

new machine.

c$)$ Using your result in part $($b$),$ calculate the Net Present Value $($NPV$)$ if

Dolfin Juice purchase the new machine.

d$)$ Should Dolfin Juice continue to operate the old machine or purchase

the new machine? Explain.