ok the correct answer is this Step 7: Calculate the NPV of replacing the machine Given: Year 0 FCF: -$85,681.82 (from Step 6) Annual incremental FCF: $16,818.18 per year for 10 years (from Step 3) Discount rate: 10% Using the NPV formula: NPV = Year 0 FCF + [Annual FCF PV factor for 10-year annuity at 10%] Let me calculate the present value factor more carefully: PV factor = [1-(1+r)^(-n)]/r PV factor = [1-(1+0.10)^(-10)]/0.10 PV factor = [1-(1/1.10^10)]/0.10 PV factor = [1-0.3855]/0.10 PV factor = 0.6145/0.10 PV factor = 6.1446 Now calculating the NPV: NPV = -$85,681.82 + ($16,818.18 6.1446) NPV = -$85,681.82 + $103,341.31 NPV = $17,659.49 Therefore, the NPV of replacing the machine is $17,659.49. Let me double-check this calculation by computing the present value of each year's cash flow individually: Year 0: -$85,681.82 Year 1: $16,818.18/(1.10) = $15,289.25 Year 2: $16,818.18/(1.10) = $13,899.32 Year 3: $16,818.18/(1.10) = $12,635.75 Year 4: $16,818.18/(1.10) = $11,487.04 Year 5: $16,818.18/(1.10) = $10,442.77 Year 6: $16,818.18/(1.10) = $9,493.42 Year 7: $16,818.18/(1.10) = $8,630.38 Year 8: $16,818.18/(1.10) = $7,845.80 Year 9: $16,818.18/(1.10) = $7,132.55 Year 10: $16,818.18/(1.10) = $6,484.13 Sum of all present values = -$85,681.82 + $103,340.41 = $17,658.59 The difference of $0.90 is due to rounding. The NPV of replacing the machine is approximately $17,659.49