A company is considering replacing an old machine with a new more efficient model. The following information is obtained about the project. The old machine was purchased 3 years ago for $6,000,000 and was being depreciated straight-line basis to zero salvage value over 5 year of depreciable life. The old machine can be sold today for its book value.

The new machine will cost today $5 million and falls under MACRS 3-year asset category: 33%, 45%, 15% and 7%.

The new machine will require the company to increase its inventories by $250,000, its Account Receivables by $150,000 and its Account Payables by $100,000 today.

The new equipment is not expected to have any value at the end of four years of the project life. However, the new machine will increase the company