Year 0 Year 1 Year 2 Year 3 Year 4 New machine cost $1,800 After-tax salvage...

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Year 0 Year 1 Year 2 Year 3 Year 4 New machine cost $1,800 After-tax salvage value, old machine $600 Sales revenues $3,500 $3,500 Operating costs except depreciation $250 $250 $250 $3,500 $3,500 $250 Operating income $2,450 $2,983 $3,117 After-tax operating income Net cash flows after replacement (adding back depreciation) Incremental Cash Flows +A +A +A $1,470 $1,790 $1,870 $590 $2,270 $1,790 $2,003 $377 $323 Next evaluate the incremental cash flows by calculating the net present value (NPV), the internal rate of return (IRR), and the modified IRR (MIRR). Assume again that the cost of financing the new project is the same as the WACC and equals 10%. Hint: Use a spreadsheet program's functions or use a financial calculator for this task. NPV IRR MIRR Evaluation Based on the evaluation, replacing the old equipment appears to be a decision because Year 0 Year 1 Year 2 Year 3 Year 4 New machine cost $1,800 After-tax salvage value, old machine $600 Sales revenues $3,500 $3,500 Operating costs except depreciation $250 $250 $250 $3,500 $3,500 $250 Operating income $2,450 $2,983 $3,117 After-tax operating income Net cash flows after replacement (adding back depreciation) Incremental Cash Flows +A +A +A $1,470 $1,790 $1,870 $590 $2,270 $1,790 $2,003 $377 $323 Next evaluate the incremental cash flows by calculating the net present value (NPV), the internal rate of return (IRR), and the modified IRR (MIRR). Assume again that the cost of financing the new project is the same as the WACC and equals 10%. Hint: Use a spreadsheet program's functions or use a financial calculator for this task. NPV IRR MIRR Evaluation Based on the evaluation, replacing the old equipment appears to be a decision because