Delta Inc. is considering the purchase of a new machine which is expected to increase sales by $10,000 in addition to increasing nondepreciation expenses by $3,000 annually. Due to the sales increase, Delta will need to increase working capital by $1,000 at the beginning of the project. Delta will depreciate the machine using the straightline method over the projects five year life to a salvage value of zero. The machines purchase price is $20,000. The firm has a marginal tax rate of 34 percent, and its required rate of return is 12 percent.

1) The machines NPV is A) $1,123.99. B) $1,556.56. C) $2,556.56. D) $2,123.99.

2) The machines incremental aftertax cash inflow for year 1 is A) $7,980. B) $6,420. C) $8,620. D) $5,980.

3) The initial investment for this decision is A) $23,000. B) $27,000. C) $21,000. D) $20,000.

4) The machines IRR is A) greater than 12 percent. B) equal to 12 percent. C) less than 12 percent. D) less than 0.

5) The machines aftertax incremental cash flow in year five is A) $5,980. B) $8,620. C) $7,120. D) $6,980.