AL-BAZAR Company is contemplating the purchase of a new grinder to replace the existing grinder. The existing grinder was purchased 2 years ago at an installed cost of $55,300; it was being depreciated straight-line for 5 years. The existing grinder is expected to have a usable life of 5 more years. The new grinder costs $105,800 and requires $4,500 in installation costs; it has a 5-year usable life and would be depreciated on a straight-line basis. AL-BAZAR can currently sell the existing grinder for $70,900 without incurring any removal or cleanup costs. To support the increased business resulting from the purchase of the new grinder, accounts receivable would increase by $40,400, inventories by $29,000, and accounts payable by $57,600. At the end of 5 years, the existing grinder would have a market value of zero; the new grinder would be sold to net $29,200 after removal and cleanup costs and before taxes and all the funds invested in NWC will be recovered. The firm is subject to a 40% tax rate.

MACRS 5-years recovery period

1	20%
2	32%
3	19%
4	12%
5	12%
6	5%

the Existing grinder currently produced 500,000 units per year for 5 years, AL- BAZAR financial analyst expecting that the new grinder will increase production by 5% per year. the price per unit produced is $1000 and it is expected to be unchanged to maintain the 50% market share. on the other hand, the total production cost per unit is $400 and it is expected to grow by 7% each year for the new grinder only. if you know that the market size is 1,000,000 calculate the following;

Accumulated depreciation at the end of the second year of the existing grinder
Calculate PI?
Determine the incremental operating cash flows in year 1 associated with the proposed grinder replacement
Calculate the NPV market rate =65%
Determine the total cash flows in year 5 associated with the proposed grinder replacement
calculate the initial investment associated with the replacement of the existing grinder by the new one
if the market share increases to 55% in the fifth year of the. new grinder life calculate the NPV
Calculate the Discounted payback period of the new grinder, market rate=65%
Determine the incremental operating cash flows in year 3 associated with the proposed grinder replacement
Determine the incremental operating cash flows in year 2 associated with the proposed grinder replacement
Determine the terminal cash flow expected at the end of year 5 from the proposed grinder replacement
After-tax proceeds from sale of new grinder
Determine the incremental operating cash flows in year 5 associated with the proposed grinder replacement
Determine if the Financial manager of AL- BAZAR company should accept or reject the replacement decision based on discounted Payback period (the cut-off period is 3 years)
Determine the incremental operating cash flows in year 4 associated with the proposed grinder replacement