Hat Co. is considering the replacement of its old, fully depreciated hat press. Two new presses are available. A steam press costs $200,000, has a five-year expected life, and will be able to make twice as many hats as the old machine, yielding an additional $60,000 in after-tax cash flows. A dry press costs $300,000, has a 7-year expected life, and will generate after-tax cash flows of $63,400 per year. Currently, Hat Co. is valued at $5,000,000 and has $600,000 in debt at 6%. Its tax rate is 20%. The cost of equity for similar companies is 15%.

Calculate Hat Co.'s after-tax weighted average cost of capital. What is the NPV (after-tax) and discounted breakeven for the steam and dry presses? Which press should Hat Co. select?