Installation cost must be added to the machine cost in year (0).

2. The networking capital does not change from year to year and remains constant at $11,000.

3. Use the same MACRS figures for depreciation.

4. Use the Before tax savings ($105,500) as positive cash flow for years 1 though 5.

5. Use the After tax salvage value of the machine in year 5 for cash flow.

6. Add back the depreciation figures to the cash flow.

7. You will not have a table similar to slide 6-16 because your sales figures won't change. Just treat the cost saving as cash flow.

Once you adjusted for these figures, you should have your cash flow figures for years 0 to 5 which you can use to figure out NPV and IRR using your financial calculator or Excel and answer the questions listed on the project sheet. Finally make a decision based on NPV and IRR rules. for pros and cons of each method refer to your book or do an internet research.