4. Analysis of a replacement preject A. times frms wil need to dedide if they want to centinue to use their ourrent equipment ar replace the equipment with nemer equipmert. The company will need to do repilcemene analysis to determine whid option is the best financial dedision for the cempany. Levodss Co. is considering replacing an existing piese of equiprnent. The project invelves the foluwing: - The new equipmere ail have a cost of s600,000, and ic is celigible for 10046 bonus depreciation so ic mill be fully depredated at t - 0. - The old machine ana purchased before the new tax law, so it is being depreciated an a skraight-line basis. It has a beok value of $200,000(ab year o) and four more years of depreciation left $50,000 per year }. - The new equicment mill have a salvage value of $0 at the end of the project's life fyear 6 ]. The old machine has a current salvage value at year 0} of $300,000. - Replacing the old machine wil require an investment in net operating working capikal (NowC) of $20,000 that will be recovered at the end of the project's life (year 6). - The few machine is more efficient, so the fim's incremental earnings before interest and taxes (EaIT) =il inorease by a total of $300,000 in each of the fext six years (years 15 ). Hint: This value represents the differefoe besmeen the revenues and operacing cests finducing depreciatian expense) generated using the new equipment and that earned using the old equipment. - The project's cost of eapital is 13%6. - The company's annual tax race is 25%. Complete the folowing table and compute the incremental cain foms associated with the replacemert of the old equipmerk akh the few equiprient. The fat present value NPO of this repiacement project is: $812,249$576,874$575,343$778,405