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3-Year 5-Year 7-Year Excel Problem Show All Excel Work (19 points) Terrafirma, Inc. is evaluating a new machine to replace an old centrifuge machine. The told machine has a current book value of $500,000 and an estimated pre-oxx salvage value of 5350,000. It is expected to last for more years. It is deprecated to zero using the straight-line method Recovery Year 1 2 3 4 5 0.3333 0.4445 0.1481 0.0741 0.2000 0.3200 0.1920 0.1152 0.1152 0.0576 0.1429 0.2449 8.1749 0.1249 0.0893 0.0893 0.0892 0.0446 The new machine cost $2.520,000 and the salvage value is estimated at 5525,000 at the end of the years. Terrafirma must increase it's NWC by $250,000 at the beginning of the project and will be recovered at the end of the project. The firm's accounting department determined the new centrifuge is in the 7-year chuse. The depreciation factors are listed to the right The machine will save 51.250.000 in operating costs per year. Terrafirma's x rate is 35 percent and its cost of capital is 15 percent Calculate the NPV. Is this project acceptable using the NPV modell Why or why not! (5 points) Calculate the IRR Is this project acceptable using the IRR model? Why or why nod 5 points Calculate the payback period. Is this project acceptable using the payback period model the payback must be less than 2 years? Why or why not! (5 points) Should Terraarmace or reject this project! Why or why not? (4 points) 678 + Inputs Project Ule 6 Years New Equip 52.520,000 21 New Equip SV (Eco)-5 5525.000 22 Old Equip Book Valueto 5500.000 2. Old Equp SV (Econto $350.000 24 Old Equip SV (Econ) - 5 50 25 Increase NWC $250.000 Cover Sheet Problem 1 Dehine B E Year G Dep Factor New Equip Old Equip Increase NWC Sales Rev - Cost Savings = Dep (New) 3 Dep (Old) Change in Dep Tax 4 NI 5 OCF -7 SV (AT) - Return NWC -9 50 CF (Assets) 51 Decision Why? 33 NPV BAIRR 52 Decision Why? 53 NPV 54 IRR 55 Payback 56 Overall Decision 57