McKinney Corporation is evaluating whether to replace one of its machines. The current machine was purchased $3$ years

ago for $$10,000$ and falls into the MACRS $5-$year class. It has $1$ year of remaining life and a $$1,500$ salvage value one

year from now. The current market value of the older machine is $$3,000.$ Alternatively, the company could purchase a

new machine for $$16,000.$ Delivery of the new machine would cost $$300$ and installation would cost $$200.$ The new

machine is expected to increase inventory needs by $$800,$ and accounts payable is expected to increase by $$500.$ The new

machine falls in the MACRS $5-$year class, has a $1-$year economic life and a salvage value at the end of $1$ year of $$12,000.$

It is expected to increase revenue by $$6,000$ per year, and is expected to decrease costs by $$3,000$ per year. The firm has a

$40\%$ tax rate and a cost of capital of $11\%.$ The MACRS $5-$year class uses the following percentages: $20\%,32\%,19\%,$

$12\%,11\%$ and $6\%.$ Round all CFs to the nearest dollar. $(10$ pts$.$ each answer $$ put the correct sign!$)$

Calculate the overall NPV$.$ Answer: $$1,871\mathrm{.}71$ Check figures: CF$0=-13,840$; CF$1=17,440$