at times firms will need to decide if they want to continue to use their current equipment or replace the equipment with newer equipment. The company will need to do replacement analysis to determine which option is the best financial decision for the company. Price Co, is considering replacing an existing piece of equipment. The project involves the following: - The new equipment will hove a cost of $1,200,000, and it is eligible for 100% bonus depreciation so it will be fully depreciated at t=0. - The old machine was purchased before the new tax low, so it is being depreciated on a straight-line bosis. It has a book value of $200,000 (at year 0) and four more years of depreciation left ( $50,000 per year). - The new equipment will have a salvage value of $0 at the end of the project's life (year 6 ). The old machine has a current salvage volue (at year 0 ) of $300,000. - Replacing the old machine will require an investment in net operating working cepital (NOWC) of 550,000 that will be recovered at the end of the project's life (year 6 ). - The new machine is more efficient, so the fim's incremental earnings before interest and taxes (EBIT) will increase by a total of 5600,000 in each of the next six years (years 1-6). Hint: This value represents the difference between the revenues ond operating costs (including depreciation expense) generated using the new equipment and that earned using the old equipment. - The project's cost of capital is 13%. - The company's annual tax rate is 25%. Complete the foilowing rablo and compute the incremental cash flows associsted with the replacement of the old oquipment with the new equipment. The net present value (NPV) of thas replacement project is: +1,277,342 61,310,732 5944,122 51,332,878