A company purchased a large plastic extrusion machine worth US\$ 45,000 for a manufacturing process 3 years ago. After 3 years of use, this machine currently has a book value of US\$22,500. An assessment reveals that the machine can still be used for another 3 more years with annual operating costs of US $7,125, annual maintenance costs of 4,550 and no salvage value. This machine is depreciated using straight line depreciation. However, due to rapid technological advancements, better machine alternatives are now available in the market. The company is contemplating replacing the existing machine with a new one. The newer machines will definitely lower the annual operating and maintenance costs. The existing machine will be traded in if a new machine is purchased by the company. The company is looking at two possible replacements, Machine X and Machine Y. Data on these alternatives, and the trade-in values for the existing machine if the company decides to replace it with a new one, are as follows: Using three years as length of study period for this investment decision, equalize the lives of the three alternatives before answering each of the succeeding questions. Recommend whether the company should keep the old machine or replace it with Machine X or Machine Y. Use Present Worth to solve this problem. Assume instead that the company has a corporate income tax of 34%, capital gains tax of 7.2%, and an after-tax MARR of 13%. 1. What is the net after-tax cash flow of Machine X on year 0 ? 2. What is the net after-tax cash flow of Machine X on year 1? 3. What is the net after-tax cash flow of Machine X on year 3? 4. What is the net after-tax cash flow of Machine Y on year 0 ? 5. What is the net after-tax cash flow of Machine Y on year 1? 6. What is the NPV/Present Worth when the company chooses to replace the existing machine with Machine X ? 7. What is the NPV/Present Worth when the company chooses to replace the existing machine with Machine Y? Based on your previous computations, what would you recommend to the company? Keep existing machine Replace with Machine X Replace with Machine Y Assuming a corporate income tax of 32%, and a before-tax cost of capital of 14%, what is the company's MARR after tax