Use the following information to answer questions 11 - 15. First American is considering buying a new machine to increase production. It will cost $3,000. Shipping will be $300. It has a three-year class life. At the end of one year they plan to sell the machine for $2,000. The new machine will allow FA to increase revenues by $1,800 each year but expenses will increase by $400 each year. If the new machine is purchased, inventory will decrease by $1,000 and accounts payable will increase by 350. Straight-line depreciation will be used. FA's marginal tax rate is 34% and its cost of capital is 7%. What is the NICO for this project?

$4,650

-$1,950

$3,950

$3,950

6 points

QUESTION 12

1.What is the depreciation for years 1 - 4?

$1,100; $1,100; $1,100; 0

$325; $650; $650; $325

$775; $1,550; $1,550; $775

$550; $1,100; $1,100; $550

6 points

QUESTION 13

1.What is the OCF for year 1?

$1,111

$561

$1,298

$1,950

6 points

QUESTION 14

1.What is the Terminal Cash Flow (TCF)

$395

$3,605

$905

$2,255

6 points

QUESTION 15

1.Should FA accept this project?

Yes, the NPV is $65.89

No, the NPV is -$65.89

No, the NPV is -$543

No, the NPV is -$912