NPV Analysis. Two new machines are being evaluated for possible purchase. Forecasts related to the machines are: Machine 1           Machine 2 Purchased price...

NPV Analysis. Two new machines are being evaluated for possible purchase. Forecasts related to the machines are:

Machine 1           Machine 2

Purchased price                                                                $50,000 $60,000

Estimated life (straight-line depreciation)             4 years                  4 years

Estimated scrap value None None

Annual cash benefits before income tax:

Year 1                                                                                    $25,000                $45,000

Year 2                                                                                    25,000                   19,000

Year 3                                                                                    25,000                  25,000

Year 4                                                                                    25,000                   25,000

Income tax rate                                                                40%                        40%

Compute the net present value of each machine. Assume a cost of capital of 8%.