You have been asked by the President of Mega Corporation to evaluate the proposed acquisition of a new machine.

You have been asked by the President of Mega Corporation to evaluate the proposed acquisition of a new machine. The machine’s basic price is $50,000 and it will cost another $10,000 to modify it for special use by Mega Corporation. The machine falls into the MACRS 3-year class. It will be sold after four years for $20,000. The machine would require an increase in net working capital of $2,000. The purchase of new machine will not affect revenues, but it is expected to save Mega Corporation $20,000 per year in before-tax operating costs (mainly labor). Mega’s marginal tax rate is 40 percent.If the project’s cost of capital is 10 percent, should Mega purchase the machine? Evaluate the project based on NPV method. a.$1,623.34 b.$1,480.31 c.$936.34 d.$1,820.00 e.$1,820.46