Old Machine:

• Was bought 3 years ago for $50,000
• Is being depreciated with $0 salvage value over 10 years straight line
• This machine can be sold for $30,000 today

New Machine

• $70,000
• Will be depreciated over 7-year life with $7000 salvage value (straight line depreciation)

Other Facts

• The new machine will add $5000 in revenue each year
• It will provide cost savings of $3000 each year
• Working Capital of $5000 more will be needed at the beginning of the project (year 0)
• Tax Rate = 40%
• cost of capital =10%

1. The initial investment (t=0) relevant to this project is ______________.

2. The after-tax operating cash flows (t=1-7) for each year is ______________.

3. The terminal value of the project is ______________.

4. NPV of the replacement project is ______________.