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

Cost of 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 are expected to be constant over the projects $4$ 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 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 $20\%$ required rate of return to evaluate this replacement project. Using the NPV and IRR criteria, is the project viable?