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Integrative: Investment decision Holliday Manufacturing is considering the roplacernent of an existing machine. The new machine coots $128 million and ropuiros instalation costs of $145,000. The existing machine can be sold currently for $180,000 before taxes. It is 2 years old, oost 5809,000 new, and has a 5388 , 320 book value and a remaining usetul life of 5 years. It was being depreciated under MACRS using a 5-year recowery poriod depreciation remaining. If it is held for 5 more years, the machine's market value at the end of year 5 will be 50 , Over its 5 -year life, the new machine should reduci operating costs by $353,000 per year. The new machine will be depreciated under MACRS using a 5 -year recovery period. The new machine can be sold for $198,000 net of removal and cleanup costs at the end of five years. An increased investment in net working capital of $24,000 will be needed to suppert operations if the new machine is acquired. Assume that the firm has adequate operating income against which to deduct ariy loss experienced an the sale of the existing machine. The firm has a 9.3% cost of capital and is subject to a 40% tax rate. a. Develop the not cash flows needed to analyze the proposed replacement. b. Determine the net present value (NPV) of the proposal. c. Determine the internal rate of return (IRR) of the proposal. d. Make a rocommendation to accept or rejoct the replacement proposal, and justify your answer. e. What is the highest cost of capital that the firm could have and still accept the proposal