$$Below is both the question problem as well as MY calculations and answers. My problem is: I$\text{'}$m concern my NPV answer is somehow incorrect but I$\text{'}$m not sure how or where I went wrong in my calculation steps. So I need help looking over it all and finding my misteps, if there are any. $??$Is the $40\%$ tax supposed to on the pretax operating income, or on the incremental depreciation?? Thank you$$

$($MACRS $5$year percentages used: Yr$120\%,$ Yr$232\%,$ Yr$319\%,$ Yr$412\%,$ Yr$511\%$ and lastly Yr$66\%).$

MY CALCULATIONS: Step $1$: Sale of Old Machine:

Selling price of old: $3000$

$-$Tax on Sale $(40\%)$: $160>(3000-2600)*0\mathrm{.}4$

$=$ Net CF from Sale: $$2840$

Step $1\mathrm{.}5$: Initial Investment Outlay $($Yr $0)$

Purchase of new: $($$$8000)$

Net Working Cap: $(1500)$

Net CF from Old: $2840$

$=$ Initial NCF $($Yr $0)$: $-$$$6,660$

Step $2.$ Change in Depreciation:

Yr$1$: $(8000*\mathrm{.}20)-350=$ $$1250$

Yr$2$: $(8000*\mathrm{.}32)-350=$ $$2210$

Yr$3$: $(8000*\mathrm{.}19)-350=$ $$1170$

Yr$4$: $(8000*\mathrm{.}12)-350=$ $$610$

Yr$5$: $(8000*\mathrm{.}11)-350=$ $$530$

Yr$6$: $(8000*\mathrm{.}06)-350=$ $$130$

Step $3$: Tax on Pretax NOI $(1000+1500-$ Change in Depr$)$:

Yr$1$: $1250*0\mathrm{.}4=$ $$500$

Yr$2$: $290*0\mathrm{.}4=$ $$116$

Yr$3$: $1330*0\mathrm{.}4=$ $$532$

Yr$4$: $1890*0\mathrm{.}4=$ $$756$

Yr$5$: $1970*0\mathrm{.}4=$ $$788$

Yr$6$: $2370*0\mathrm{.}4=$ $$948$

Step $4$: Net Cash Flows:

Yr$1$: $$2500-(1250+500)+1250=$ $$2000$

Yr$2$: $$2500-(2210+116)+2210=$ $$2384$

Yr$3$: $$2500-(1170+532)+1170=$ $$1968$

Yr$4$: $$2500-(610+756)+610=$ $$1744$

Yr$5$: $$2500-(530+788)+530=$ $$1712$

Yr$6$: $$2500-(130+948)+130$ $$1552-300+480+1500$ NWC $=$ $$3232$ NCF yr$6$

$**$Step $5$: Terminal CFs:

New: $800$ gain $*(1-\mathrm{.}4)=$$$480$ net cf

After$-$tax terminal cf

Old: $500$ loss $*(1-\mathrm{.}4)=($$$300)$ net cf

Step $6$: BA $2$ Calculator for NPV:

CFO: $-6,660$

CF$1$: $2000$

CF$2$: $2384$

CF$3$: $1968$

CF$4$: $1744$

CF$5$: $1712$

CF$6$: $3232$

I$/$Y: $15\%$

NPV $=$ $$1,421\mathrm{.}36($ROUNDED$)$