Rozetta Manufacturing Company (RMC) is considering the purchase of a new equipment to replace the old one. The old equipment was purchased 5 years ago at a cost of $20,000, and it is being depreciated on a straight-line basis to a zero salvage value over a 10-year life. The current market value of the old equipment is $14,000. The new equipment, which falls into the MACRS 5-year class, has an estimated life of 5 years; it costs $28,000 with installation and adjustment charges of $2,000. RMC plans to sell the equipment at the end of the fifth year for $1,000. The applicable depreciation rates are 0.20, 0.32, 0.19, 0.12, 0.11, and 0.06. The new equipment is expected to reduce operating expenses by $3,000 per year, while sales are not expected to change (that is the new equipment is expected to generate before-tax cash savings of $3,000 per year). RMC’s tax rate is 40% and its WACC is 10%.