Rooney, Inc. is considering a new machine for its largest product line. The cash flows are: Installed Purchase Price $ 40,000 Reduced Cost of Materials $ 6,000 per year Labor Savings $ 9,000 per year Increase in Working Capital (for Year 0 and 1 only) $5,000 Depreciable Life (zero salvage value) 4 years Economic Life 8 years Required Return 12% Tax Rate 40%

1. What is the NPV of this machine if it does not replace any other?

2. Suppose the machine replaces another machine with the following characteristics: Book Value of Old Machine $ 6,000 Market Value of Old Machine $ 4,000 Remaining Depreciable Life of Old Machine 6 years

Assume the old machine was not expected to have any salvage value and compute the NPV of the New Machine.

Please show all steps. Don't round off until you get to the end.