Company A is planning to buy a new equipment to replace the existing old equipment. The new equipment will not affect the firm's unlevered net income or net working capital. The old equipment was purchased 3 years ago at a price of $1.2 million and follows a five-year straight-line depreciation method. The old equipment has a market value of $0.5 million now and $0 in the future. The new equipment will cost $1.4 million and follows a five-year straight-line depreciation method. By the end of year five, the CFO expects to sell the new equipment for a price of $0.6 million. What is the NPV of the equipment replacement plan for the next five years at a discount rate of 12%? The marginal tax rate for the firm is 25%.

A.-0.046 million

B.-0.054 million

C. 0.035 million

D. 0.045 million

My process (help me find what's wrong. If your answer is out of alternatives above, please don't formally answer it, just comment on it.)

Former:

Sale price=0.5 million

Book value=1.2-(3/5)*1.2=0.48 million

Capital gain=0.5-0.48=0.02 million

Tax=0.02*25%=0.005 million

Total CF from sale=0.5-0.005=0.495 million

Latter:

Sale price=0.6 million

Book value=0 million

Capital gain=0.6-0=0.6 million

Tax=0.6*25%=0.15 million

Total CF from sale=0.6-0.15=0.45 million

years	0	1	2	3	4	5
Sales		0	0	0	0
COGS		0	0	0	0
=Gross Profit		0	0	0	0	0
-s, g, a		0	0	0	0	0
-R&D		0	0	0	0	0
-Depreciation		0.04	0.04	0.28	0.28	0.28
=EBIT	0	(0.04)	(0.04)	(0.28)	(0.28)	(0.28)
-Tax=25%		(0.01)	(0.01)	(0.07)	(0.07)	(0.07)
=Unlevered		(0.03)	(0.03)	(0.21)	(0.21)	(0.21)
+Depreciation		0.04	0.04	0.28	0.28	0.28
-Capital Expenditures	1.4
+Adjustment salvage value	0.495					0.45
-NWC
=Free Cash Flow	(0.905)	0.01	0.01	0.07	0.07	0.52
NPV	-0.499