Drexel Company is considering the purchase of a new machine costing \(\$ 15,000\). The new machine is to be depreciated on the sum-of-the-years'-digits method. The salvage value at the end of 5 years is zero. The estimated annual pre-tax incomes from the new machine are \(\$ 5,000\). The company's income tax rate is \(25 \%\) and required rate of return is \(10 \%\). Assume that the annual inflation rate is expected to be \(3 \%\) for the next 5 years.

{Required:}

(a) Calculate the net present value of the purchase of the new machine using the nominal method.

(b) Calculate the net present value of the purchase of the new machine using the real method.