Problem 16-52 Net Present Value; Internal Rate of Return; Payback: Sensitivity Analysis; Taxes {Sections 2, 3} (L0 16-3, 16-4, 16-6, 16-8] The management of TriCounty Air Taxi, Inc., is considering the replacement ofan old machine used in its helicopter repair facility. It is fully depreciated but it can be used by the corporation through 20:45. If management decides to replace the old machine. James Transportation Company has offered to purchase it for $65,000 on the replacement date. The old machine would have no salvage value in 20x5. If the replacement occurs. a new machine would be acquired from HIllcrest Industries on December 31, 20x1. The purchase price of $1,000,000 for the new machine would be paid In cash at the time of replacement. Due to the Increased efficiency of the new machine, estimated annual cash savings of $320,000 would be generated through 20x5, the end of its expected useful life. The new machine is not expected to have any salvage value at the end of 20x5. Tri-County's management requires all investments to earn a 14 percent aftertax return. The company's tax rate Is 30 percent. The new machine would be classied as threeyear property for MACRS purposes. Use game; and Ezmmuj, for your reference. (Use appropriate factorts} from the tables provided.) Required: 1. Compute the net present value of the machine replacement investment. 3. Compute the payback period for the replacement of the machine. 4. How much would the salvage value of the new machine have to be on December 31. 20x5, in order to turn the machine replacement into an acceptable Investment? Required 1 Required 3 Required 4 Compute the net present value of the machine replacement investment. (Negative amount should be indicated by a minus sign. Round your intermediate calculations and final answer to the nearest whole dollar.) Net present valueRequired 1 Required 3 Required 4 Compute the payback period for the replacement of the machine. (Round your answer to 1 decimal place.) Required 1 Required 3 Required 4 How much would the salvage value of the new machine have to be on December 31, 20x5, in order to turn the machine replacement into an acceptable investment? (Round your intermediate calculations and final answer to the nearest whole dollar.) Salvage value of the new machineExhibit 16-9 Selected MACRS Depreciation Percentages as Computed by the IF (incorporates half-year convention; also incorporates recent modifications in the tax laws) MACRS Property Class Year 3-year 5-year 7-year 10-year 33.33% 20.00% 14.29% 10.00% 2 44.45 32.00 24.49 18.00 14.81* 19.20 17.49 14.40 7.41 11.52* 12.49 11.52 11.52 8.93* 9.22 5.76 8.92 7.37 8.93 6.55* 4.46 6.55 6.56 10 6.55 11 3.28 *Denotes the year during which the depreciation method switches to the straight-line method. Source: IRS Publication 946, entitled "How to Depreciate Property."