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TM company is considering replacing its machine with a new modelthat sells for $40,000, the cost of installation is $6,000. Networking capital needed would be $5500. The old machine has beenfully depreciated and has a $2500 salvage value. The new machinewill be depreciated as a 5-year MACRS asset. Revenues are expectedto increase $18,000 per year over the 5-year life of the newmachine. At the end of 5 years the new machine is expected to havea $1500 salvage value. What are the NPV, IRR for this project if TMhas a required rate of return of 14% and a marginal tax rate of35%? Operating costs are not expected to increase from the currentlevel of $8,000 per year. Discuss your recommendations to thecompany’s CEO about the replacement.