ABC is looking to purchase a new machine for a 3 year project, that will cost 1,350,000 and replace the old machine that they were using. The old machine was being depreciated but has been fully depreciated The original cost of the old machine was $500,000, and it can be sold for $100,000. The new machine's depreciation schedule and salvage value are listed below. The new machine cannot make one of the company's old products so as a result they will lose $5,000 a year in pre-tax profits. The project requires $10,000 in working capital that will be recaptured at the end of the project. The new machine will result in annual cost savings of $375,000. Should they go forward with the change? The depreciation schedule for the new machine and its salvage value is given below (depreciated over 4 years) Depreciation MACRS - NEW 33.33% 44,45% 14.81% 7.4100% Purchase Price New S 1,350,000 Purchase Price, Old S 500,000 WACC 8.00% Tax rate 25.00% Salvage Value (New) S 500,000 Salvage Value (Old) 5 100,000 Working Capital Req S 10,000 Lost Pretax Profits 5 5,000 Cost Savings (Annual) 5 375,000 NPV Project Go forward