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REPLACEMENT ANALYSIS

marginal tax rate is $35\%,$ and it has a $12\%$ WACC.

a$.$ What initial cash outlay is required for the new machine? Round your answer to the nearest dollar. Negative amount should be indicated by a minus sign.

b$.$ Calculate the annual depreciation allowances for both machines and compute the change in the annual depreciation expense if the replacement is made. Round your answers to the nearest dollar.

Year Depreciation Depreciation Change in

Allowance, Allowance, Old Depreciation

New

c$.$ What are the incremental net cash flows in Years $1$ through $5?$ Round your answers to the nearest dollar.

Year $1$

Year $2$

Year $3$

Year $4$

Year $5$

$

$ $ ;

$

d$.$ Should the firm purchase the new machine?

$-$Select$-V$