Extra Problem FSL is considering the purchase of a new spectrometer. The machine costs $85,000. The machine will be depreciated using a 3-year MACRS schedule. The machine will also require a working capital investment of $4,000. FSL expects to use the machine for 3 years and then sell it for $30,000. The machine will not affect costs, but it will save the company $25,000 per year. The company's tax rate is 40%. The required rate of return is 10%. Find the NPV of the proposed machine. (1) Find the initial investment required: Cost of the machine After tax Proceeds (if any) from the sale of an old machine Required investment in working capital Total investment required (2) Determine the annual operating cash flows 1 2 3 Annual Savings Annual Costs Depreciation ? ? Net Income OCF (3) Determine the after tax proceeds from the sale (if any) of the equipment at the end of the project and any working capital recovered Sale price Book Value Taxable gain Taxes paid Net cash from the sale Working capital recovered Total cash recovered at the end (4) Find the PV of your cash flows 0 Enter the initial investment required. 1 The OCF in year 1 2 The OCF in year 2 3 The OCF in year 3 +Cash recovered (if any) The NPV is