Quest #1
Cash receipt	$400,000	$200,000
Decrease in expenses	$350,000	$350,000
	$750,000	$550,000
		Year(s)	Amount	Tax	After tax CF	PV Factor 16%	PV of CF
Cost of equipment		Now	($2,525,000)		($2,525,000)	1	($2,525,000)
Working capital needed		Now	($60,000)		($60,000)	1	($60,000)
Cash Receipt		Now	$750,000	1 - 0.4	$450,000	1	$450,000
Year	Cost	MACRS %	Depreciation
1	$2,525,000	20%	$505,000	40%	$202,000	0.8621	$174,144
2	$2,525,000	32%	$808,000	40%	$323,200	0.7432	$240,202
3	$2,525,000	19%	$479,750	40%	$191,900	0.6407	$122,950
4	$2,525,000	12%	$303,000	40%	$121,200	0.5523	$66,939
Salvage value of equipment			$190,000	1 - 0.40	$114,000	0.5523	$62,962
Release of working capital			$60,000	-	$36,000	0.5523	$19,883
			Net Present Value (NPV)				($1,447,919)
Given the negative NPV, ATV should not invest in the machine.