Your company is considering a machine which will cost $50,000 at Time 0 and which can be sold after 3 years for $10,000. $12,000 must be invested at Time 0 in inventories and receivables; these funds will be recovered when the operation is closed at the end of Year 3. The facility will produce sales revenues of $50,000/year for 3 years; variable operating costs (excluding depreciation) will be 40 percent of sales. No fixed costs will be incurred. Operating cash inflows will begin 1 year from today (at t 1). By an act of Congress, the machine will have depreciation expenses of $40,000, $5,000, and $5,000 in Years 1, 2, and 3 respectively. The company has a 40 percent tax rate, enough taxable income from other assets to enable it to get a tax refund on this project if the project's income is negative, and a 10 percent cost of capital. What is the projec t's NPV? 4. Mom's Cookies, Inc., is considering the purchase of new cookie oven. The original cost of th old oven was $30,000; it is now five years old; and has a current market value of $5,000. The old oven is being depreciated over a line basis, resulting in a current book value of S15,000 and an annual depreciation expense of $3,00 life towards a zero estimated salvage value on a straight 0. Management is contemplating the purchase of a new oven whose cost is $25,000 and whose estimated salvage value is zero. Expected before-tax cash saving from the new oven are $2,000 a year. Depreciation is computed using MACRS 5 year life, and cost of capital is 12 percent. Assume 40 percent tax rate. What is the net present value of the new oven? machine that originally cost $37,500, has a current book value of $12,500 with five years of life left, and is being depreciated using the straight line method over its 15 year life with zero salvage value. The replacement machine being considered would cost $100,000 and have a five year expected life over which it would be depreciated using MACRS of 5 year. At the termination of S years the new machine is expected to have a salvage value of 35,000. Material efficiencies resulting from the replacement would result in savings of S30,000 per year before tax and depreciation. Currently the old machine could be sold for $17,000. Assume a 34 percent marginal tax rate and required rate of return of 15 percent. a. Find the NPV of the replacement project. b. Find the IRR of the replacement project