ABC Co. is considering replacing an old power generator with a new one. The old one was purchased 5 years ago for $200,000. It is depreciated strait-line to zero over its 10-year life. It is expected to be worthless at the end of its 10-year life. If ABC sells it today, ABC should receive $110,000 for the generator. The new generator costs $300,000. It has a life of 5 years and will be depreciated strait-line to zero over its 5-year life. It is expected to be worth $20,000 at the end of its 5-year life. The new generator is expected to reduce the operating costs by $100,000 per year. There is no change in net working capital. The discount rate of this replacement project is 15%, and the tax rate is 35%.

What is the incremental operating cash flow for this project?

options:

$100,000

$60,000

$79,000

$76,000

$64,000

What is the incremental net capital spending for this project?

$118,500

$300,000

$182,500

$193,500

$169,500