The Member One Company is considering the purchase of a machine tool to replace an existing tool that has a book value of $3,000 and can be sold for $1, 500. The salvage value of the old machine in four years is zero and it is depreciated on a straight line basis. The proposed machine will perform the same function the old machine is performing; however, improvement in technology will result in a greater cash flow. If the new machine is purchased, the cash inflow (before depreciation and taxes) will be $15,000 per year, if the decision if to keep the old machine the cash inflow will be 8,000 per year. The new machine has a four year life, costs $14,000, and can be sold for an expected $2,000 at the end of the fourth year. Assuming straight-line depreciation, a 40 percent tax, rate, and the cost of capital at 16 percent, find the payback period, IRR, NPV, and P.I An existing machine has a book value of $2, 100; it can be operated for seven years during which it will be depreciated to zero terminal value. Alternatively, a new machine that has an expected life of seven years can be purchased to replace the existing machine for $12, 500. The new machine is expected to have a salvage value of $2,000 and is expected to provide cash flows (before depreciation and taxes) of $13, 300 per year, if they keep the old machine the cash flow will be $10,000 per year. The tax rate is 40 percent, the cost of capital is 16 percent, and straight-line depreciation is used. The existing machine can be sold for $2, 600. Find the P.B., IRR, NPV, and P.I. Two mutually exclusive projects have projected cash flows as follows: Period Project A Project B 0 -200.00 -200.00 1 100.00 0 3 100.00 331.00