4. Analysis of a replacement project Al times fm will need to decide if they want to continue to use the current quipement or replace the equipment with new equipment. The compatty will need to do replacement analysis to determine which option is the best lancial decision for the company Price Co. is considering replacing an existing piece of equipment. The project involves the following: . The equipment will have a cost of $600,000, and is digible for 100% bonus depreciations will be fully depreciated att 0. . The old machine purchased before the new tax law, so it is being depreciated on a straight-line basis. It has a book value of $200,000 (at year) and four more years of depreciation (550,000 per year . The new equipment will have a salvage value of $0 at the end of the project's life (year 5). The old machine has a current salvage value (at year of $300,000. replacing the old machine will require an investment in net operating working capital (NOWC) af $60,000 that will be recovered at the and of the project's life (year 6). . The main machine is more efficient, so the firm's incremental canings before interest and taxis (EBIT) will increase by a total of $300,000 in each of the next six years (years 1-5). Hint: This value represents the difference batman the revenues and operating COSES (including depreciation expanse) generated using the new equipment and that earned using the old equipment . The project's cost of capital is 13 . The company's annual tax rate is 25% Complete the following table and compute the incremental cash flows associated with the replacement of the old equipment with the new en Year o Year 2 Year 3 Year 4 Years Ye Inicial ant EBIT - Tax Depreciation KT + Salvage valu - Tax salvage -NOWC + Recapture of NOWC Total free cash flow The nel present value (NPV) of this replacement project O $787,304 O $754,500 O $656,087 O $557,674