Marie Pty Ltd Is Considering Modernising Its Production by Purchasing

Marie Pty Ltd is considering modernising its production by purchasing a new machine and selling an old machine. The following data have been collected on this investment: $\begin{array}{c}\begin{array}{lr}\quad\quad\quad\quad\quad\underline{\text { Old Machine }}\\\text { Cost } & \$ 40,000 \\\text { Accumulated depreciation } & \$ 20,000 \\\text { Remaining life } & 4 \text { years } \\\text { Current salvage value } & \$ 5,000 \\\text { Salvage value in 4 years } & \$-0- \\\text { Annual cash operating costs } & \$ 18,000\end{array}\begin{array}{lr}\quad\quad\quad\quad\quad\underline{\text { New Machine }}\\\text { Cost } & \$ 19,000 \\\text { Estimated useful life } & 4 \text { years } \\\text { Salvage value in 4 years } & \$ 5,000 \\\text { Annual cash operating costs } & \$ 14,000\\\\\\\end{array}\end{array}$ The income tax rate is 40%, and the required rate of return is 16%. Depreciation is $5,000 per year for the old machine. The new machine would be depreciated $7,600 in 2015, $5,700 in 2016, $3,800 in 2017, and $1,900 in 2018. Assume Marie would purchase the new machine in December 2014 and dispose of the old machine in January 2015. The net cash flow associated with selling the old machine in January 2015 (i.e., the value of the sale and any tax consequences) would be:

A) $11,000
B) $5,000
C) $15,000
D) $20,000