A firm is trying to determine whether to replace an existing asset. The proposed asset has a purchase

price of $$50,000$ and has installation costs of $$3,000.$ The asset will be depreciated over its five year life

using the straight$-$line method. The new asset is expected to increase sales by $$17,000$ and non$-$

depreciation expenses by $$2,000$ annually over the life of the asset. Due to the increase in sales, the firm

expects an increase in working capital during the asset$$s life of $$1,500,$ and the firm expects to be able to

sell the asset for $$6,000$ at the end of its life. The existing asset was originally purchased three years ago

for $$25,000,$ has a remaining life of five years, and is being depreciated using the straight$-$line method.

The expected salvage value at the end of the asset$$s life $($i$.$e$.,$ five years from now$)$ is $$5,000$; however,

the current sale price of the existing asset is $$20,000,$ and its current book value is $$15,625.$ The firm$$s

marginal tax rate is $34$ percent and its required rate of return is $12$ percent.

a$)$ The net initial outlay if the new asset is purchased is:

b$)$ The net incremental free cash flows from this new investment are:

c$)$ The after$-$tax terminal cash flow $($at the end of year $5)$ is:

d$)$ The NPV for this replacement decision is: