12. Should the firm replace its older machine with the new machine?/ a. No, the incremental cash flow from the new machine is insufficient to justify investing in the new machine. Buying the new machine would decrease the value of the firm by $4.375.

b. No, the incremental cash flow from the new machine is insufficient to justify investing in the new machine. Buying the new machine would decrease the value of the firm by $1.815.

c. No, the incremental cash flow from the new machine is insufficient to justify investing in the new machine. Buying the new machine would decrease the value of the firm by $2.670.

d.No, the incremental cash flow from the new machine is insufficient to justify investing in the new machine. Buying the new machine would decrease the value of the firm by $2.243.

As the capital budgeting director of Colson Manufacturing, Craig is analyzing the replacement of an machine. The old machine was purchased 2 years ago for $15,000; into the MACRS 5-year class; and it has 2 years of remaining life with a $1,500 salvage value 2 years from now. The current market value ofthe machine is $4,000. The price of a new machine is currently s30,000, plus an additional s1500 for installation and $500 for shipping. The new machine falls into the MACRS 5-year class, has a 2-year economic life, and a $20,000 salvage value. The new machine will require a $3,500 increase in inventory, and accounts payable is expected to increase by $2,300. The new machine is expected to increase revenue by $5,500 per year and decrease costs by $1,000 per year. The firm has a 10 percent cost of capital and a marginal tax rate of40 percent. The MACRS 5-year class uses the following percentages: 20%, 32%, 19%, 12%, 11%, 6% (in that order). (Round ali CFs to nearest dollar.) Space