Seong Seng Coachbuilders is considering purchasing a new machine to replace an old one.

Cost of a new machine:

Purchase price $85,000

Installation & Commissioning $10,000

The proposed new machine is to be depreciated using the straight-line method over its four-year useful life with an estimated salvage value of $15,000.

The proposed new machine is expected to increase sales and operating expenses and the amount is expected to be constant over the project's 4-year life.

Sales $65,000

Operating expenses $26,000

Seong Seng operating working capital is also expected to increase as follows:

Inventory $12,000

Accounts receivable $8,000

Accruals $3,000

Accounts payable $6,000

The old, existing machine is also being depreciated using the straight-line method over its 6 years of useful life towards zero salvage. It was purchased 2 years ago with a total depreciable value of $60,000. It can be sold today for $38,000.

Seong Seng tax bracket is 40% and its management uses a 20% required rate of return to evaluate this replacement project. Using the NPV and IRR criteria, is the project viable?