. . 1. Star Printing Inc. is considering replacing some of its old printing machines with new, more modern machines. Star has compiled the following information: The new equipment cost $20 million and would be depreciated over 10 years to a book value of $1 million The old equipment currently in place has a net book value of $1 million and if kept would continue to depreciate to a net book value of zero over the next 3 years. Star estimates it could sell the old equipment for $1 million. Star estimates that the new equipment world be worth $800,000 in ten years and that the cost of removing the equipment at that time would be $100,000. The installation of the new equipment is expected to be $2 million, with $1.5 million being capitalized over 10 years and $500,000 being expensed immediately. To run the new equipment, Star estimates that $60.000 in working capital will be required. The new equipment is expected to generate a pretax savings (less worker, maintenance, etc) of $4 million per Other information: No investment tax credit Star uses Straight-Line Depreciation Effective tax rate = 40 Star's Cost of Capital = k = 12| Determine the project's NPV . year. CFBT CFAT PV Item Capitalized Installation and Equipment Cost Expensed Installed Cost Change in Net Working Capital Sale of old equipment Investment Tax Credit Net Initial Outlay Lost Depreciation from the sale of old equipment Depreciation Change in Revenues minus expenses Sale of equipment Removal Expenses Return of net working capital PV of NCFS NPV