Cold Duck Manufacturing Inc. is a company that produces iGadgets, among several other products. Suppose that Cold Duck Manufacturing Inc. considers replacing its old machine used to make iGadgets with a more efficient one, which would cost $2,000 and require $280 annually in operating costs except depreciation. After-tax salvage value of the old machine is $400, while its annual operating costs except depreciation are $1,200. Assume that, regardless of the age of the equipment, Cold Duck Manufacturing Inc.'s sales revenues are fixed at $2,500 and depreciation on the old machine is $400. Assume also that the tax rate is 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 (NCFs) before replacement are $940 , and they are constant over four years. Although Cold Duck Manufacturing Inc.'s NCFs before replacement are the same over the four-year period, its NCFS after replacement vary annually. The following table shows depreciation rates over four years. Year 1 Year 2 Year 3 Year 4 Depreciation rates 33.33% 44.45% 14.81% 7.41% your answers to the Complete the following table and calculate incremental cash in each year. Hint Rour 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 $2,000 $400 After-tax salvage value, old machine Sales revenues $2,500 $2,500 $280 1,924 $ 1,154 $ $280 1,331 $ 799 $ $ $2,500 $280 1,553 $ 932 $ 2,220 $ $2,500 $280 2,072 1,243 Operating costs except depreciation Operating income After-tax operating income Net cash flows after replacement (adding back depreciation) Incremental Cash Flows $ $ $ $ $ -1,600 $ $ $ $ Next evaluate the incremental flows by calculating the net present value (NPV), the internal rate of return (IRR), and the modified IRR (MIRR). Assume again that the cost of financing the new project is the same as the WACC and equals 10%. Hint: Use a spreadsheet program's functions or use a financial calculator for this task. NPV IRR MIRR Evaluation Based on the evaluation, replacing the old equipment appears to be a decision because