You have just landed a consulting position with Hawkesworth Inc. Your first task is to determine if an old bottling machine should be replaced with a new more efficient machine. The projects' data are shown below. The old machine would be depreciated using the straight-line method over its remaining 2-year life, would have a $20,000 salvage value, and has a current market value of $30,000. The new machine will cost $100,000 with added installation costs of $25,000, be depreciated using a 3 years MACRS schedule, 33%, 45%, 15%, and 7%, and have a salvage value of $30,000 after 4 years. An increase in net working capital of $5,000 would be required. Because of production efficiency, the new bottling machine will be able to produce 11,000 bottles per year compared to a production of only 9,000 bottles per year for the old machine. In addition, the new machine is more efficient with a 50% operating cost compared to 65% for the old machine. Unit price, price inflation and cost inflation will be no different between the two machines.

Price$100,000Freight$0Installation$25,000Change in NWC$5,000Sale of old machine$30,000

Operating Flows and Inflation Rates:

New:Old:Sales volume11,0009,000Year 0 sales price$10.00$10.00Op costs50.0%65.0%Price inflation4.0%4.0%Cost inflation2.0%2.0%

Salvage Value, Tax Rate, and Cost of Capital:

New:Old:Salvage value$30,000$20,000Tax rate40% Cost of capital10% Old Depreciation:3 yr MACRSStraight LineCurrent Book Value $30,000Life4 years2 years remaining

Use the following MACRS schedule:

Years1234MACRS Factor33%45%15%7%

What is the project's total net cash flow in year 4?

Group of answer choices

$99,431

$102,450

$67,990

$44,710

$125,332

What is the NPV of replacing the old machine with the new machine?

Group of answer choices

$118,436

$25,655

$32,227

$36,740

$20,630