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 $$100,000$

Freight $$0$

Installation $$25,000$

Change in NWC $$5,000$

Sale of old machine $$30,000$

Operating Flows and Inflation Rates:

New: Old:

Sales volume $11,0009,000$

Year $0$ sales price $$10\mathrm{.}00$ $$10\mathrm{.}00$

Op costs $50\mathrm{.}0\%65\mathrm{.}0\%$

Price inflation $4\mathrm{.}0\%4\mathrm{.}0\%$

Cost inflation $2\mathrm{.}0\%2\mathrm{.}0\%$

Salvage Value, Tax Rate, and Cost of Capital:

New: Old:

Salvage value $$30,000$ $$20,000$

Tax rate $40\%$

Cost of capital $10\%$

Old Depreciation: $3$ yr MACRS Straight Line

Current Book Value $$30,000$

Life $4$ years $2$ years remaining

Use the following MACRS schedule:

Years $1234$

MACRS Factor $33\%45\%15\%7\%$

$1.$ What is the project's net cash flow in year $3?$

Group of answer choices

$$50,000$

$$16,761$

$$35,145$

$$46,721$

$$16,161$

$2.$ What is the project's total net cash flow in year $4?$

Group of answer choices

$$44,710$

$$99,431$

$$102,450$

$$67,990$

$$125,332$