A manufacturer is considering replacing a production machine tool. The new machine, costing $40,000, would have a life of 5 years and no salvage value, but would save the firm $5,000 per year in direct labor costs and $2,000 per year in indirect labor costs. The existing machine tool was purchased 4 years ago at a cost of $40,000. It will last 5 more years and will have no salvage value. It could be sold now for $15,000 cash. Assume that money is worth 10% (interest rate) and that difference in taxes, insurance, and so forth are negligible. Use an annual cash analysis to determine whether the new machine should be purchased.