Calculate the incremental earnings before depreciation and taxes in year 1.

Calculate the incremental depreciation in years 3 and 5.

Calculate the incremental after-tax cash flow for years t = 2 through t = 4.

Calculate the terminal cash flow, if you know that the existing machine was fully depreciated and sold at $40,000, while the proposed machine sold at $190,000 after 4 years from the date of purchase.

Use the following information to answer the questions below: Sanad Inc. is considering replacing an existing piece of equipment with a more sophisticated machine. The following information is given. Editing Machine Cost STDOO Purchased 2 years ago Depredation using MACRS Over a 5-year recover schedule Current market value $105,000 Five year uable life remaining Facts Proposed Machine Cost - 5150000 Installation $20,000 Depreciation the MACES 5-year recovery schedule will be used Five year usable life expected Earnings before Depreciation and Taxes Existing Machine Proposed Machine Year $160.000 1 S12 2 150,000 2 12LCO 3 140000 3 170,000 4 14000 4 170,000 5 140.000 5 120.000 The firm has determined its optimal capital structure, which is composed of the following sources and target market value proportions: Source of Capital Target Market Proportions 30% Long-term debt. Preferred Stock Common Stock 15% 55% Debt: The firm can sell a 20-year, $1,000 par value, 7 percent bond for $990. A flotation cost of 2 percent of the face value would be required in addition to the discount of $10. Preferred Stock: The firm has determined it can issue preferred stock at $65 per share par value. The stock will pay an $8.00 annual dividend. The flotation cost stock is $7 per share. Common Stock: The firm's common stock is currently selling for $50 per share. The dividend expected to be paid at the end of the coming year is $5.07. Its dividend payments have been growing at a constant rate for the last five years. Five years ago, the dividend was $3.45. a new common stock issue must be underpriced at $1 per share and the firm must pay $3 per share in flotation costs