Asset replacement Capital budgeting: Danner Company has the following infor mation about a machine it now owns: Remaining useful economic life Annual cash operating cost Current market value Book value (and tax basis) Annual straight-line depreciation 10 years $240,000 $ 160,000 $ 200,000 $ 20,000 A replacement is available with the following characteristics Cost Useful life Annual cash operating cost $ 600,000 10 years $ 80,000 Using the new machine will require an increase in inventory of $80,000. The company would use straightr-line depreciation on the new machine. Cost of capital is 14% and the combined federal and state income tax rate is 40%. Required (a) Determine the investment required to acquire the new machinery, including the investment in working capital (b) Determine the annual net cash flows for the investment Determine the net present value of the investment (d) Should the replacement be purchased