You're evaluating a new electron microscope for the QA

$($

quality assurance

$)$

$$unit$.$ The microscope will cost $

$19$

$,$

$000$

$$to buy and another $

$2$

$,$

$000$

$$to install, and will be sold for $

$1$

$,$

$800$

$$after

$3$

$$years$.$ It falls into the

$3$

$-$

year MACRS class, with depreciation rates as follows:

Year

$1234$

Depreciation rate

$33$

$\%$

$45$

$\%$

$15$

$\%$

$7$

$\%$

The microscope will require an inventory of spare parts worth $

$5$

$,$

$000$

$.$

$$The equipment will not increase revenue, but will save the company $

$10$

$,$

$000$

$$in labor costs each year.

Your company's marginal tax rate

$($

federal plus state

$)$

$$is

$34$

$\%$

$$and the appropriate cost of capital for this project is

$10$

$\%$

$.$

What is the incremental cash flow in year

$2$

$?$

What is the net salvage value at the end of year

$3$

$?$

What is the incremental cash flow in year

$3$

$?$

What is the NPV of this project?