Part 1: Choosing between mutually exclusive projects (15 points) Suppose Kramerica Industries hired you are the manager in charge of selecting new equipment used for producing newly licensed smart widgets. Both machines produce smart widgets of equal product quality, and either machine selected would require regular replacement WACC, Tax Rate, and NWC: Tax Rate is 25% WACC is 22% NWC is fixed (either machine will require $25,000 up front to buy inventory) Option 1: Machine FY: Machine FY will provide an annual cost savings of $320,000 per year. Equipment Cost/Depreciation Basis is $822,000 Physical life of 6 years MACRS depreciation for 5-year asset life (20%, 32%, 19.2%, 11.52%, 11.52%, 5.76%) Option 2: Machine HS: Machine HS will provide an annual cost savings of $260,000 per year. Equipment Cost/Depreciation Basis is $680,000 Physical life of 6 years MACRS depreciation for 5-year asset life (20%, 32%, 19.2%, 11.52%, 11.52%, 5.76%) Note: Neither machine would change revenues, but is expected to reduce costs per year in before-tax operating costs. Therefore, use the tax shield approach when calculating operating cash flow for each year. a. Which machine gives the highest NPV? b. What is the NPV, IRR and MIRR for the machine you selected in part a