1.Your company is analyzing purchase of a machine costing $2,900 today. The investment promises to add $7,500 to sales one year from today, $12,500 two years from today, and $15,000 three years from today. Incremental cash costs should consume 85% of the incremental sales. The tax rate is 30% and the companys financing rate is 12.2%. The investment cost is depreciated to zero over a 3-year straight-line schedule. Find the projects net present value and internal rate of return.

2.The COO at Textile Limited is considering replacing the current looming machine it uses. The machine they currently own and operate originally cost $220,000. Its annual depreciation is $20,000. It was purchased 6 years ago, with an expected life of 10 years. Its salvage value today is $100,000 and its salvage value in 4 years is 0. The new machine costs $250,000, depreciated according to a straight-line schedule over 4 years with a salvage value of zero. It will save the company $80,000 per year and require $50,000 in new working capital. The tax rate is 30% and the companys financing rate is 10.2%. According to the NPV, should the company replace the machine?