Analysis of a replacement project

Ac times firms will need to dedde if they want to continue to use their current equipment or replace the equipment with never equipment. The company will need to do replacement analysis to determine which option is the best rifiancial decision for the company$-$

Price $C_0.$ is considering replacing an existing piece of equipment. The project involves the following:

The new equipment will have a cost of $$1,200,000,$ and it is eligivie for $10096$ bonus depreciation so it will be ruly depreciated at $t=o.$

The old machine was purchased belore the new tax law, so it is being deprecieted on a straight$-$line basis, It has a book value of $$200,000($at year $0)$ and four more years or depreciation left per year$).$

The new equipment will have a salvage value of $$0$ at the end of the project's life $($year $6).$ The cld machine has a cumeric seivage value $($at year $0)$ of $$300,000.$

Replacing the old machine will require an irvesment in net cperating working capital $($NowC$)$ of $$50,$ ooo that will be recovered at the and of the project's life $($year $6$