Arroy Snackfoods is considering replacing a five-year-old machine that originally cost $75,000. It was being depreciated using straight-line to an expected salvage value of zero over its original 10-year life, and could now be sold for $40,000. The replacement machine would cost $215,000 and have a five-year expected life. It would be depreciated using STRAIGHT LINE depreciation. The expected salvage value of this machine after 5 years is $30,000. The new machine is expected to operate much more efficiently, saving $6,000 per year in energy costs. In addition, it will eliminate one salaried position saving another $68,000 annually. The firms marginal tax rate is 25% and the WACC is 9.5%.

1. Set up an operating cash flow statement, and calculate NPV, IRR, and MIRR of the replacement project. Should the project be accepted?