A special-purpose machine tool set would cost $20,000. The tool set will be financed by a $10,000 bank loan repayable in two equal annual installments at 10% compounded annually. The tool is expected to provide annual (material) savings of $30,000 for two years and is to be depreciated by the MACRS three-year recovery period. The tool will require annual O&M costs in the amount of $5,000. The salvage value at the end of the two years is expected to be $8,000. Assuming a marginal tax rate of 40% and MARR of 15%, what is the net present worth of this project? You may use Table P10.19 as a worksheet for your calculation.
TABLE PI0.I9

Cash Flovw Statement Operating activities Net income Depreciation $10,400 $12.019 6,666 4.445 Investment activities Investment $20,000 Salvage 8,000 Gains tax (40%) Financial activities Borrowed funds 10,000 Principal 0 repayment Net cash flow $10,000