You are considering replacing an old machine which was purchased 2 years ago at $90000. The old machine is still working and has three more years of useful life; and will be depreciated fully by then. If you sell the old machine today, you can sell at $65000. The new machine costs you $159000 and has a life of three years. The new machine is more efficient; therefore the operating expenses (excluding depreciation) will be reduced by $65000 per year. Replacing old with new one reduces the inventory level by $12000. The old machine will be worthless after three years from now whereas the new machine could be scrapped at $10000. Use straight-line method for deprecation. The tax rate is 25% and required rate of return is 18%. a. Estimate the Incremental Initial cash flow. [4 marks) b. Estimate the Incremental Operating Cashflows from Year 1 to Year 3. [6 marks] c. Estimate the Final Year incremental cash flows including the incremental terminal cash flows. [5 marks] d. Compute the NPV of the incremental cash flows and write your recommendation. (4+1 marks]