Click here to read the eBook: Replacement Analysis REPLACEMENT ANALYSIS The Bigbee Bottling Company is contemplating the replacement of one of its bottling machines with a newer and more efficient one. The old machine has a book value of $600,000 and a remaining useful life of 5 years. The firm does not expect to realize any return from scrapping the old machine in s vears, but it can sell it now to another firm in the industry for $295,000. The old machine is being deprecated by $120,000 per year, using the straight line method. The new machine has a purchase price of $1,150,000, an estimated useful life and MACRS dass e of years, and an estimated salvage value of $160,000. The applicable depreciation rates are 20%, 32, 193, 124, 11%, and on. It is expected to economice on electric power usage, fabor, and repair costs, as well as to reduce the number of defective bottles. In total, an annual savings of $220,000 will be realized if the new machine is installed The company's marginal tax rate is 35%, and it has a 12% WACC. a. What initial cash outlay is required for the new machine? Round your answer to the nearest dollar. Negative amount should be indicated by a minus b. Calculate the annual depreciation allowances for both machines and compute the change in the annual depreciation expense if the replacement Year Depreciation Depredation Change in Allowance, Allowance, Old Depreciation New 1 $ $ 2 3 4 5 c. What are the incremental net cash flows in Years 1 through 57 Round your answers to the nearest do Year 1 Year 2 Year 3 Year 4 Years d. Should the firm purchase the new machine? Select Support your answer. The input in the box below will not be praded, but may be reviewed and considered by your instructor 4. In general, how would each of the following factors affect the lowestment decision, and how should each be treated? The input in the box below will not be graded, but may be reviewed and considered by your instructie 2. The WACC is not constant, but is increasing as Bigbee adds more projects into a capital budget for the year. The input in the box below will not be graded, but may be reviewed and considered by your instructe