The Darlington Equipment Company purchased a machine 5 years agoat a cost of $95,000. The machine had an expected life of 10 yearsat the time of purchase, and it is being depreciated by thestraight-line method by $9,500 per year. If the machine is notreplaced, it can be sold for $15,000 at the end of its usefullife.

A new machine can be purchased for $180,000, includinginstallation costs. During its 5-year life, it will reduce cashoperating expenses by $60,000 per year. Sales are not expected tochange. At the end of its useful life, the machine is estimated tobe worthless. MACRS depreciation will be used, and the machine willbe depreciated over its 3-year class life rather than its 5-yeareconomic life; so the applicable depreciation rates are 33%, 45%,15%, and 7%.

The old machine can be sold today for $60,000. The firm's taxrate is 40%. The appropriate WACC is 9%.

1. If the new machine is purchased, what is the amount of theinitial cash flow at Year 0? Round your answer to the nearestdollar. Negative amount should be indicated by a minus sign.
   $
2. What are the incremental net cash flows that will occur at theend of Years 1 through 5? Round your answers to the nearest dollar.

   Year 1	Year 2	Year 3	Year 4	Year 5
   $	$	$	$	$

3. What is the NPV of this project? Round your answer to thenearest cent. Negative amount should be indicated by a minussign.
   $
   
   Should Darlington replace the old machine?