Annual Outlook: Unit sales per year = 10,000 units Price per unit initially = $22 Inflation of 3% per year (starting in year 2) applied to price per unit Costs per year will keep up with inflation, so calculate total costs as 75% of sales Tax Rate is 25% WACC is 20% NWC is fixed (either machine will require $25,000 up front to buy inventory)

Machine FY would have the following costs and depreciation schedule: Equipment Cost/Depreciation Basis is $60,000 Physical life of 6 years For FY, you have the option of MACRS depreciation for 5-year asset life (20%, 32%, 19.2%, 11.52%, 11.52%, 5.76%), or straight-line depreciation (ignoring the half-year convention for straight-line) Calculate NPV using both methods