In the below problem, how do they get the NPV=$1,908.47. When I calculate the Cash flow/Discount Factor I get different numbers than the answer key.

Now recognize that at the end of Year 6 Dauten would recover its net operating working capital investment of $1,500, and it would also receive $800 from the sale of the replacement machine.However, since the machine would be fully depreciated, the firm must pay 0.40($800) = $320 in taxes on the sale.Also, by undertaking the replacement now, the firm forgoes the right to sell the old machine for $500 in Year 6; thus, this $500 in Year 6 must be considered an opportunity cost in that year.Taxes of $500(0.4) = $200 would be due because the old machine would be fully depreciated in Year 6, so the opportunity cost of the old machine would be $500 - $200 = $300.

Period Cash Flow/Discount Factor = Discounted Cash Flow

0 -$7160 /1.11 -7160

1 $2000 / 1.11 1801.80

2 $2384 /1.11 1934.91 (my calculation gives me 2646.24)

3 $1968/ 1.11 1438.83

4 $1744/1.11 1148.83

5 $1712/1.11 1015.99

6 $3232/1.11 1727.96

The net present value of this incremental cash flow stream, when discounted at 11%, is $1,908.47.Thus, the replacement should be made.

Other info you might need:

Replacement Analysis

Old Machine

Book Value$2,100

Deprecation MethodStraight Line

Remaining Life6 years

Market (Salvage) Value$2,500

End of Life Value$500

New Machine

Cost$8,000

Depreciation MethodMACRS: 20%, 32%, 19%, 12%, 11% and 6%

Life Expectancy6 years

End of Life Value$800

Change in Sales$1,000 annual increase

Change in Operating Costs$1,500 annual decrease

Change in Net Operating Working Capital$1,500 increase ($2,000-$500)

Tax Rate40%

WACC11%