The following capex related information applies to questions 21 and 22. Noranda Mines Ltd is considering replacing an under ground drilling machine with a new highly automated model that will increase yearly before tax cost savings by $340,000 per year for 10 years. The new machine will cost $1,600,000 and a salvage value of $350,000. The old machine has a current market value of $100,000 but only $50,000 if sold in 10 years. The new machine will require initial working capital of $70,000 which will be released at the end of the project. The CCA rate for drilling machines is 25%. The net present value of tax shield related to this capex is $218,528 The firm has a 35% tax rate and requires a rate of return of 14% on all capital expenditures.