Excel Problem 2 Show All Excel Work (32 points) Chesapeake Shipyards is considering replacing an six-year-old welding machine with a new one that will decrease operating costs before taxes by $75,000 per year. The new machine costs $200,000 and its estimated life is 4 years. The salvage value at the end of the life is $15,000. The new welder will be depreciated using the MARCS 7 year factors. The net working capital will increase by $10,000 if the new machine is purchased. The old machine is expected to last 4 years. Its current salvage value is $5,000 and is depreciated to zero at the end of four years using the straight-line approach. Its current book value is $15,000 and the expected salvage value at the end of 6 years is expected to be $1,000. The required return or WACC is 15 percent and the tax rate is 40 percent. The required payback period is 4 years or less. What is the payback period? Is the project acceptable using this model? What is the NPV? Is the project acceptable using this model? What is the IRR? Is the project acceptable using this model? Should Chesapeake replace the welding machine? Explain your decision. 4 Years Inputs Project Life New Equip Cost New Equip SV (t = 4) Increase NWC Old Equip SV (t = 0) Old Equip BV (t = 0) Old Equip Tax SV (t = 4) Old Equip Econ SV (t = 4) $200,000 $15,000 $10,000 $5,000 $15,000 0 $1,000 Op. Cost Decrease $75,000 per year Tax Rate 0.4 WACC 0.15 Decision Why? NPV IRR Payback Overall Decision Explain