4. Analysis of a replacement project At times firms will need to decide if they want to continue to use their current equipment or replace the equipment with newer equipment. The company will need to do replacement analysis to determine which option is the best financial decision for the company. Lopusso Co, is considering replacing an existing piece of equipment. The profect involves the following: - The new equipment will have a cont of $600,000, and it is ellgible for 100% bonus depredation so it will be fully depreclated at t=0. - The old machine was purchased before the new tax law, so it is being depreclated on a straight-line basis. It has a book value of $200,000 (at vear 0) and four more years of depredation left ($50,000 per year). - The new equiprnent will have a salvage value of 50 at the end of the project's life (vear 6 ). The old machine has a current salvage value (at rear o) of $300,000. - Feplaging the ofd machine will require an investment in net operating working capital (Nowc) of $30,000 that wil be recovered at the end of the prolect's life (vear 6 ). - The new machine is more effident, se the firm's incremental earnings before interest and taxes (EBrT) will increase by a total of 1300,000 in each of the next six years (vears 10 ), Hint: This value represents the difference between the revenues and operating costs (induding depreciation erpense) generated using the new equipment and that eamed using the old equipment. - The project's cost of cabital is 13\%. - The compasy/s unnual tax ratn ir 25 hir. Complete the following table and compute the incremental cash flows associated with the replacement of the old equipment with the new equipment. The net bresent value (Wep) of this teplacersent project is: sin1,67 themo 5570,925