• XYZ Incorporated company is considering a new machinery system that will initially cost $1.5 million. It will save $500,000 per year in storing and warehousing costs. The system is expected to last for five years and will be depreciated using 3-year MACRS. The system is expected to have a salvage value of $70,000 at the end of year 5. There is no impact on net working capital. The marginal tax rate is 30%. The required return is 12%.