Based on the data, net cash flows (NCFs) before replacement are ________ (a. $2,800 b. $1,680 c. $2,380 d. $980), and they are constant over four years.

Based on the evaluation, replacing the old equipment appears to be a ________ (a. good b. bad) decision because _________________ (a. the IRR is small b. the MIRR is lower than the IRR c. the NPV is negative).

8. Replacement analysis Green Moose Industries is a company that produces iGadgets, among several other products. Suppose that Green Moose Industries considers replacing its old machine used to make iGadgets with a more efficient one, which would cost $1,700 and require $380 annually in operating costs except depreciation. After-tax salvage value of the old machine is $700, while its annual operating costs except depreciation are $1,000. Assume that, regardless of the age of the equipment, Green Moose Industries's sales revenues are fixed at $4,500 and depreciation on the old machine is $700. Assume also that the tax rateis 40% and the project's risk-adjusted cost of capital, r, is the same as weighted average cost of capital (WACC) and equals 10%. Based on the data, net cash flows (NOFs) before replacement are and they are constant over four Years. Although Green Moose Industries's NCFs before replacement are the same over the 4-year period, its NCFs after replacement vary annually. The following table shows depreciationrates overfour years. Year 1 Year 2 Year 3 Year 4 Depreciation rates 33.33% 44.45% 14.81% 7.41% Complete the following table and calculate incremental cash flows in each year. Hint: Round your answers to the nearest dollar and remember to enter a minus sign if the calculated value is negative. Year 0 Year 1 Year 2 Year 3 Year 4 New machine cost $1,700 After-tax salvage value, old machine $700 Sales revenues $4,500 $4,500 $4,500 $4,500 operating costs except depreciation $380 $380 $380 $380 Operating income After-tax operating income Net cash flows after replacement (add ng back depreciation) Incremental Cash Flows