DEF Company is evaluating a new machine that costs $75,000 and will reduce operating costs by $18,000 annually for 6 years. The company’s tax rate is 25%, and the required rate of return is 14%.

Requirements:

1. Calculate the annual depreciation.
2. Determine the annual after-tax savings.
3. Compute the annual cash flows.
4. Calculate the Net Present Value (NPV).
5. Assess whether DEF Company should purchase the machine based on the NPV.