The KRAY Inc. is considering the replacement of an existing machine. The new machine costs $220,000 and requires $15,000 in setup costs and $35,000 in additional net working capital. The new machines useful life is 10 years after which it can be sold for $25,000. KRAY uses straight-line depreciation and the machine will be depreciated to a book value of zero on a 5-year basis. KRAY has a tax rate of 35% and a 14% cost of capital (discount rate). The new machine is expected to increase revenues minus expenses by $55,000 per year. Find the following.

a. The initial investment

b. The after-tax cash flows

c. The net salvage value

d. The NPV of replacing the machine

e. Should the replacement take place?