A manufacturing company is considering the purchase of a new assembly machine, the Delta. Senior executives were keen to purchase this equipment as the company has been criticised for manufacturing low qualities products. Before they purchase the Delta, the Managing Director decided to get the project analyst to estimate the net present value (NPV) of overhauling their existing manufacturing equipment. Their existing equipment has now reached the end of its expected life but the engineering department expected, with a major overhaul, it would keep going for another 10 years. However, there is no sustainability benefits associated with this existing machine, or as a result of its overhaul. Likewise, the continuation of existing sales is uncertain. In spite of uncertain data, the project analyst decided to calculate the NPV as if existing sales and sales growth continued. The estimated investment in this major overhaul is $500,000. The overhauled machine will be depreciated using straight-line depreciation with no salvage value. The company's tax rate is 20%. The pre-tax cash inflows are highlighted in the table below. Discount rate is 10% Pre-tax cash flow $ Year 60,000 2 90,000 3 109,000 165,000 263,000 275,000 253,000 190,000 110,000 10 63,000 1. What is the after-tax cash flow for each year? 2. Calculate the net present value of the overhaul alternative 3. If the Delta alternative is costlier than the overhaul alternative, discuss what decision should the management make