Part 3: To replace or not to replace? That is the question. Dill Corporation, a sports equipment manufacturer, has a machine in use that was originally purchased 6 years ago for $200,000. The firm depreciates the machine under 10-year simplified straight-line depreciation (4 years depreciation remaining) to zero. Once removal and cleanup costs are taken into consideration, the expected net selling price for the present machine today will be $90,000. Dill can buy a new machine for a net price of $300,000 (including installation costs of $15,000). The proposed machine will qualify for immediate year 0 expensing under 100% bonus depreciation. If the firm acquires the new machine, its working capital needs will change accounts receivable will increase $20,000, inventory will increase $25,000, and accounts payable will increase $22,000. Earnings before depreciation, interest, and taxes (EBITDA) for the present machine are expected to be $80,000 for each of the successive 5 years. For the proposed machine, the expected EBITDA for each of the next 5 years are $140,000, $140,000, $135,000, $135,000, and $130,000, respectively. The corporate tax rate for the firm is 25%. Dill expects to be able to liquidate the proposed machine at the end of its 5-year usable life for $44,000. The present machine is expected to bring in $10,000 upon liquidation at the end of the same time period. Dill expects to recover its net working capital investment upon termination of the project. The firm is subject to a tax rate of 25%. Assignment (in your spreadsheet) 1. Calculate the initial investment or outlay for this replacement project. 2. Calculate the relevant operating cash flows for the replacement project analysis. 3. Calculate the terminal cash flow associated with this replacement project. 4. Should Dill go ahead with this replacement project if the WACC for the project is 12%? Support your decision.

Please use Excel cell formulas to answer, thank you!