The Mendez Company is trying to decide whether to replace a packing machine that it uses to pack salsa into individual serving size packages. The following information is provided: 
Required:
1) Compute the increase or decrease in total net income over the five-year period if the company chooses to buy the new machine.
2) Compute the impact on the company's net income in the first year if the current machine is replaced. Do not take depreciation into account.
3) Under what circumstances might a manager not take the action that is in the best interest of the firm in the long run?
Definitions:
Coupon Rate
The interest rate stated on a bond when it's issued, which represents the annual interest payment made by the issuer relative to the bond's face value.
Yield To Maturity
The total return anticipated on a bond if it is held until it matures, including both interest payments and the gain or loss on the principal, at the current market price.
Balance Sheet
A summary presenting the financial condition of an organization, showing the company's assets, debts, and owner's equity at a certain time.
Long-term Debt
Debt that is due to be paid back over a period greater than one year, used as a way for businesses to finance their operations or expand.
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