1. A firm wants to replace old equipment, which is capable of generating cash flows of 35,000, 25,000 and *15,000 during the next 3 years. It has a book value of 50,000 and a market value of 15,000. The firm is considering new equipment, which will require an initial cash outlay of 100,000, and is estimated to generate cash flows of 78,000, 70,000 and 45,000 for the next 3 years. Both old and new equipments may be assumed to have a zero resale value after 3 years. The tax rate is zero. Calculate the incremental cash flows.