Case 3. Will the pizza taste better? Popa's Pizza is considering replacing an existing oven with a new, more sophisticated oven. The old oven was purchased three years ago at a cost of $40,000, and this amount was being depreciated using a five-year straight-line depreciation to zero. The oven has five years of usable life remaining. The new oven being considered costs $50,000, requires $2,000 in installation costs, and would be depreciated using 5-year MACRS depreciation. The new oven would also require an increase in net working capital of $700 when it is installed. The old oven can currently be sold for $16,000 with no removal or cleanup costs. The firm pays taxes at a rate of 40 percent. The revenues and expenses (excluding depreciation) associated with the new and old oven for the next 5 ears are given in the following table New Oven Old Oven Year Revenue Revenue Expenses (excluding depreciation $120,000 $125,000 $130,000 $135,000 $140,000 At the end of this 5-year useful life, the new oven can be sold for $20,000. If the old over were to be kept, it could be sold for $5,000 at end of this 5-year period 1. Calculate the initial cash outflow associated with the replacement of the Expenses (excluding depreciation $110,000 $115,000 $120,000 $125,000 $130,000 $250,000 $260,000 $270,000 $280,000 $290,000 $220,000 $230,000 $240,000 $250,000 $260,000 2 4 old oven with the new one