At times firms wal need to dedide if they want to continue to use their currert equipment or replace the equipment with newer equipment. company will need to do replacement anaysis to determine intich oction is the best finandial decision for the cimpany. Price Co. is considering replacing an existing piece of equipment. The project involves the following: - The new equlpment will have a cost of $600,000, and it is elgoble for 100s bons depreclation so it will be fully depreciated at t=0, - The old machine was purchased before the new tar lam, so it is being deprectatitd on a straight-line basils. It has a book value of $200,000( at year 0 ) and four more yeans of depreciation lent (\$50,000 per yean). - The new equtpment will have a salvage vatue or so at the end of the profecrs life (year 6 ). The old machine has a current salvage value (at vear 0) of $300,000. - Replading Uhe old machine will require an investment in net, operseling working capital (NowC) or $60,000 that will be recovered at the end of the project's life (rear 6 ). - The new machine is more efficient, so the firms horemental cantings before interest and trues (Earr) will increase by a total of $600,000 in each of the neat six years (rears 1-6). Hint; This value reqresents the difference between the revenues and operating costs (including depredistion expense) generated using the new equipment and that earned ising the old equipment. - The project's cost of capital is 13x. - The companys annual tax rate is 25%. in is and Mimsisis