Suppose we are thinking about replacing an old computer with a new one. The old one

cost us $$1\mathrm{.}4$ million; the new one will cost $$1\mathrm{.}7$ million. The new machine will be

depreciated straight$-$line to zero over its five$-$year life. It will probably be worth about

$$325,000$ after five years.

The old computer is being depreciated at a rate of $$281,000$ per year. It will be

completely written off in three years. If we don't replace it now, we will have to replace it

in two years. We can sell it now for $$450,000$; in two years, it will probably be worth

$$130,000.$ The new machine will save us $$315,000$ per year in operating costs. The tax

rate is $22$ percent, and the discount rate is $12$ percent.

a$-1.$ Calculate the EAC for the old and the new computer. $($A negative answer should be

indicated by a minus sign. Do not round intermediate calculations and round

your answers to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$

a$-2.$ What is the NPV of the decision to replace the computer now? $($A negative answer

should be indicated by a minus sign. Do not round intermediate calculations and

round your answer to $2$ decimal places, e$.$g$.,32\mathrm{.}16.)$