(Calculating project cash flows and NPV) Marlin Manufacturing is considering whether to add new capacity to its production line with the addition of a

$1,000,000

assembly center. The purchase would result in an increase in earnings before interest and taxes of

$400,000

per year. It would cost

$50,000

after taxes to install the needed equipment; in addition, to operate this machine properly, workers would have to go through a brief training session that would cost

$10,000

after taxes. Also, because this machine is extremely efficient, its purchase would necessitate an increase in inventory of

$150,000.

This machine has an expected life of

10

years, after which time it would have no salvage value. Assume the use of the simplified straight-line method to depreciate this machine down to zero, a

34

percent marginal tax rate, and a required rate of return of

12

percent.