Cash flows estimation and capital budgeting: You are the head of finance department in XYZ Company. You are considering adding a new machine to your production facility. The new machines base price is $10,200.00, and it would cost another $2,000.00 to install it. The machine falls into the MACRS 3-year class (the applicable MACRS depreciation rates are 33.33%, 44.45%, 14.81%, and 7.41%), and it would be sold after three years for $1,550.00. The machine would require an increase in net working capital (inventory) of $770.00. The new machine would not change revenues, but it is expected to save the firm $27,275.00 per year in before-tax operating costs, mainly labor. XYZ's marginal tax rate is 30.00%. If the project's cost of capital is 15.55%, what is the NPV of the project?

$10,200.00

$20,719.37

$31,493.07

$12,200.00

$34,231.60