The installed cost will be depreciated straight-line over its 6-year tax life and will be sold for $30,000 after the five years that the plans to use it. The machine will be housed in a small building that the company paid $100,000 for but has been trying sell for $90,000. The new machine will enable the company to sell 50,000 sausages at a price of $2.75. Variables costs are $1.15 per sausage and fixed costs are $35,000. Adding the new machine will require an additional $7,000 in net working capital, which will be recovered at the end of the five-year project. The tax rate is 21% and the discount rate is 11%.

What is the NPV?

What is the IRR?

What is the depreciation tax shield for the second year of the project?