3. The Marx Brewing Company recently installed a new bottling machine. The machine's initial cost is $120,000, and can be depreciated on a straight-line basis to zero salvage in 5 years. The machine's fixed cost per year is $1,800, and its variable cost is $0.50 per unit. The selling price per unit is $1.50. Marx estimated that they will be able to sell 60,000 units per year. Additionally, they have to invest in $20,000 of working capital initially to set up the machine, and this level of working capital stays the same in subsequent years. Marx's tax rate is 34%, and it uses a 16% discount rate. Calculate the NPV of the new machine. Answer: $22,013 Hint: Please note that the costs now include both fixed cost of $1,800 per year and variable cost ($0.50 per unit x 60,000 units per year). Year Capital Investment (1) Working Capital Change in Working Capital (WC - WC1-1) (2) Operating Cash Flow Revenue Costs Depreciation Pre-tax Income (Revenue - Costs - Depreciation) Taxes (34% pretax income) After-tax Income (Pre-tax income - Taxes) OCF (added Depreciation) (3) Total Cash Flow (1+2+3) Present Values of Cash Flows NPV (sum of all Present Values) 0 1 2 3 4 5