Problem $16-52$ Net Present Value; Internal Rate of Return; Payback; Sensitivity Analysis; Taxes $($Sections $2,3)($LO $16-3,16-4,16-6,16-8)$

The management of Tri$-$County Air Taxi, Inc., is considering the replacement of an old machine used in its helicopter repair facility. It is fully depreciated but it can be used by the corporation through $205.$ If management decides to replace the old machine, James Transportation Company has offered to purchase it for $$60,000$ on the replacement date. The old machine would have no salvage value in $205.$ If the replacement occurs, a new machine would be acquired from Hillcrest Industries on December $31,20$x$1.$ The purchase price of $$1,000,000$ for the new machine would be paid in cash at the time of replacement. Due to the increased efficiency of the new machine, estimated annual cash savings of $$300,000$ would be generated through $205,$ the end of its expected useful life. The new machine is not expected to have any salvage value at the end of $205.$ Tri$-$County's management requires all investments to earn a $12$ percent after$-$tax return. The company's tax rate is $30$ percent. The new machine would be classified as three$-$year property for MACRS purposes.

Use Appendix A and Exhibit $16-9,$ for your reference. $($Use appropriate factor$($s$)$ from the tables provided.$)$

Required:

Compute the net present value of the machine replacement investment.

Compute the payback period for the replacement of the machine.

How much would the salvage value of the new machine have to be on December $31,205,$ in order to turn the machine replacement into an acceptable investment?

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Required $1$

Compute the net present value of the machine replacement investment. $($Negative amount should be indicated by a minus sign. Round your intermediate calculations and final answer to the nearest whole dollar.$)$

Net present value