Nesrin Open Technologies (NOT) plans to replace one of its servers with a more recent model. The existing machine can be sold for $85,000 today and its book value is $75,000. Annually it costs $105,715 to operate the existing machine, not counting depreciation, and the expected salvage value in five years is $25,000 for the old machine. The new machine will cost $70,000 per year to operate (excluding depreciation) and its purchase price, including shipping and installation, is $200,000. Its annual depreciation expense will be $10,000, compared to $12,500 for the existing machine. The new machine will require an increase in inventories of $10,000. After five years, the new machine will be sold for its book value of $150,000. The firm's cost of capital is 10 percent and its marginal tax rate is 30 percent. The terminal year (Year 5) after-tax nonoperating cash flow isclosestto:

Question 20 options:

• $131,250

• $138,750

• $160,000