$($Estimated time allowance: $40-50$ minutes$)$ Easy$-$Chair Corp. is considering replacing its existing equipment that is used to produce comfort recline chairs. This existing equipment was purchase $2$ years ago at a base price of $$100,000.$ Installation costs at the time for this old equipment were $$5,000.$ The existing equipment is considered a $5-$year class for MACRS. The existing equipment can be sold today for $$40,000$ and for $$0$ in $3$ years. The new equipment has a purchase price of $$200,000$ and is also considered a $5-$year class for MACRS. Installation costs for the new equipment are $$10,000.$ It is estimated that this equipment can be sold in $3$ years $($end of project$)$ for $$70,000.$ This new equipment is more efficient than the existing one and thus savings before taxes using the new machine are $$20,000$ a year. This new equipment will also require additional working capital today of $$12,000$; this investment will be recovered at the end of the project in year $3.$ The company's marginal tax rate is $20\%$ and the cost of capital is $10\%.$

What is the NPV of this replacement project? The following $6$ questions reach the value for the answer.

MACRS Fixed Annual Expense Percentages by Recovery Class