A machine currently in use was originally purchased 2 years ago for $40,000. The machine is being depreciated under MACRS using a 5-year recovery period; it has 3 years of usable life remaining. The current machine can be sold today to net $42,000 after removal and cleanup costs. A new machine, using a 3-year MACRS recovery period, can be purchased at a price of $140,000. It requires $10,000 to install and has a 3-year usable life. If the new machine is acquired, the investment in accounts receivable will be expected to rise by $10,000, the inventory investment will increase by $25,000, and accounts payable will increase by $15,000. Earnings before depreciation, interest, and taxes are expected to be $70,000 for each of the next 3 years with the old machine and to $120,000 in the first year and $130,000 in the second and third years with the new machine. At the end of 3 years, the market value of the old machine will equal zero, but the new machine could be sold to net $35,000 before taxes. The firm is subject to a 40% tax rate. (MACRS tables are provided in columns M and N to the right) (a) Determine the initial investment associated with the proposed replacement decision (b) Calculate the incremental operating cash flows for years 1 to 4 associated with the proposed replacement (Note: Only depreciation cash flows must be considered in year 4) (c) Calculate the terminal cash flow associated with the proposed replacement decision. (Note: This decision is made at the end of year 3) (d) Depict in the table below the relevant cash flows found in parts (a), (b) and (c ) that are associated with the proposed replacement decision, assuming that it has terminated at the end of year 3. (e ) Calculate the NPV at a cost of capital of 7%. Indicate whether you would recommend this project and why, (f ) Calculate the IRR. Indicate whether you would recommend this project and why