YEAR MACRS 3-YEAR| 1 | 33% |
| 2 | 45% |
| 3 | 15% |
| 4 | 7% |
Troll Inc is considering replacing an old, relativelyinefficient Troll onjection-mold machine that was purchased threeyears ago with a new, more effiecent model. The cost of the oldmachine has $7500 and had an expected MACRS life of three years. Ifthey sell the old machine now they would receive $1000. However, atthe end of five years the old machine is worthless. The cost of thenew machine is $12000 and would require an increase in inventory of1,500. Suppliers would grant the firm an additional 500 in tradecredit for the new level of inventory. The expected lfe of the newmachine is three years and will reduce annual lablor expenses from10,000 to 4,000. At the end of the project the firm will be able tosell the new machine for 3,000 an recoup their investment inworking capital. The firm has a marginal tax rate of 40 percent.Troll's marginal cost of capital is calculation and readability,round your cash dlows to the nearest whole dollar. Using netpresent value, and internal rate of return, decide whether theyshould accept or reject this project.
