Question 2 VIP Machining Ltd. is planning to purchase a new machine this year. The cost of the machine is $3,000,000. The machine is expected to produce steel desks for the next five years. The company will use straight line amortization for this machine. The dealer has offered a trade-in allowance of $150,000 for the old machine, which has a net book value of $250,000 and a UCC balance of $175,000. The new machine is expected to produce 42,000 metal desks per year. The selling price of a metal desk is expected to be $40.00 per desk. Variable production costs are $10 per desk and allocated fixed costs are $5.00 per desk. One skilled engineer must be hired to oversee the entire operation. The total salary and benefit costs for the new employee will be $110,000 per year for the next five years. Repairs and maintenance on the machine will be $50,000 per year for the next five years. In addition, spare parts inventory costing $25,000 will be required to be maintained for the five year period. The company uses a 12% after tax required rate of return, has a 25% tax rate and classifies the machine in class 8 which has a CCA rate of 20%. Required: a) Determine when the machine will payback. b) Calculate the after tax net present value of the machine