Problem #1 (6 points) Let's pretend I am back in my Kraft Food days as a "young Engineer (young - quite a few years ago !). Here is the project I have been asked to resolve: Replace an existing palletizer that has been in operation for 6 years. We paid $550,000 for the palletizer + 20% more to install it. It is being depreciated using a 7 year-recovery period under MACRS. The new palletizer I am looking at is state of the art but comes at a hefty cost of $725,000+ 20% to install it. Let's presume President Trump's new tax plan is not in effect yet so we are still held to a 35% tax rate. Our Net Working Capital is expected to increase by S20,000 due to pallet inventories which will naturally need to increase. A small business owner will pay us $90,000 for our older palletizer. What is the initial investment we would need in order to make this capital project a reality? machine being cd also using a sense still Problem #2 (8 points) A friend of mine is considering replacing a manual sheet metal press with a new automated one. His current one was purchased 4 years ago at a cost of $75,000 & is being depreciated using a 5 year-recovery period under MACRS. Their current press still has 5 years of useful life remaining. The new automated machine being considered costs 595,000+ another $10,000 to install it & will be depreciated also using a 5 year-recovery period under MACRS. He can sell the old one for $60,010 & is also still liable for a 35% tax rate because the tax plan is not law just yet. The expected revenue & expenses for both the new & the existing press for the next 5 years is as follows: (Expenses exclude depreciation & interest) YEAR EXISTING MANUAL PRESS NEW AUTOMATED PRESS REVENUE EXPENSES REVENUE EXPENSES S699,000 $685,000 $795,000 $745,000 $701,000 $685.000 $795,000 $745,000 $705,000 $685.000 5795.000 $745.000 $703,000 $685,000 $795,000 $745,000 S699,000 $685,000 $795,000 $745,000 1. Calculate the initial investment necessary to purchase the new press 2. Determine the incremental operating cash inflows realized by the replacement (consider depreciation in year 6)