Winkler Corporation is considering the purchase of a replacement machine. The new machine is priced at $54,000. The new machine will perform essentially the same function as the old machine, except that it will be able to produce 1,000 more units of product each year than the old machine. Each unit of product currently sells for $11. The variable cost of manufacturing the product is $4 a unit whether the new or the old machine is used, and variable marketing costs are $1 a unit. In addition to increased output, the new machine is expected to reduce maintenance costs by the following amounts. For financial accounting purposes, the new machine is to be depreciated on a straight line basis over a period of six years, with an expected salvage value of $6,000 (based on current period prices). For tax purposes, however, the machine will be depreciated under MACRS as five year class property (Year 1, 20%; Year 2, 32%; Year 3, 19.2%; Year 4. 11.5%; Year 5, 11.5%; and Year 6.5.8%). The company's tax rate is 30% on all income. The anticipated inflation rate is 10%. All cash inflows and outflows are expected to be affected equally by inflation. The company wants to earn a 10% rate of return on all investments, unadjusted for inflation. REQUIRED: (1) Compute the after tax cash flows, adjusted for inflation, that will be generated by the project for each year and in total for the life of the machine. Assume the analysis is performed using tax depreciation and no salvage value rather than book depreciation. Round answers to the nearest dollar. Compute the net present value of the project, taking into account inflation. Round all calculations to the nearest whole dollar. (2) WINKLER CORPORATION AMOUNTS RELATED TO COST SAVINGS FOR REPLACEMENT MACHINE Year Cost Savings Related to Maintenance 1 $ 1,500 2 1,200 3 900 4 600 5 300