Question: For the table there's a year 6 section witch is below!!! Thank you! - The new equipment will have a cost of $1,800,000, and it

 For the table there's a year 6 section witch is below!!!Thank you! - The new equipment will have a cost of $1,800,000,

For the table there's a year 6 section witch is below!!!

and it is eligible for 100% bonus depreciation so it will be

Thank you!

- The new equipment will have a cost of $1,800,000, and it is eligible for 100% bonus depreciation so it will be fully depreciated at t=0. - The old machine was purchased before the new tax law, so it is being depreciated on a straight-line basis. It has a book value of $200,000 (at year 0 ) and four more years of depreciation left ( $50,000 per year). - The new equipment will have a salvage value of $0 at the end of the project's life (year 6). The old machine has a current salvage value (at year 0 ) of $300,000. - Replacing the old machine will require an investment in net operating working capital (NOWC) of $50,000 that will be recovered at the end of the project's life (year 6). - The new machine is more efficient, so the firm's incremental earnings before interest and taxes (EBIT) will increase by a total of $700,000 in each of the next six years (years 1-6). Hint: This value represents the difference between the revenues and operating costs (including depreciation expense) generated using the new equipment and that earned using the old equipment. - The project's cost of capital is 13%. - The company's annual tax rate is 25%. Complete the following table and compute the incremental cash flows associated with the replacement of the old equipment with the new equipment. Year 5 Year 6

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