8. Replacement analysis Aa Aa Purple Whale Inc. is a company that produces iBooks, among several other products. Suppose that Purple Whale Inc. considers replacing its old machine used to make iBooks with a more efficient one, which would cost $2,000 and require $280 annually in operating costs except depreciation. After-tax salvage value of the old machine is $400, while its annual operating costs except depreciation are $1,200. Assume that, regardless of the age of the equipment, Purple Whale Inc.'s sales revenues are fixed at $2,500 and depreciation on the old machine is $400. Assume also that the tax rate is 40% and the project's risk-adjusted cost of capital, r, is the same as weighted average cost of capital (WACC) and equals 10% and they are constant over four years. Based on the data, net cash flows (NCFS) before replacement are