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Complete the following table and compute the incremental cash flows associated with the replacement of the old equipment with the new equipment. Year 0 Year
Complete the following table and compute the incremental cash flows associated with the replacement of the old equipment with the new equipment.
| Year 0 | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | Year 6 | |
|---|---|---|---|---|---|---|---|
| Initial investment | $9,000,000 | ||||||
| EBIT | |||||||
| Taxes | |||||||
| + Depreciation T | |||||||
| + Salvage value | |||||||
| Tax on salvage | |||||||
| NWC | |||||||
| + Recapture of NWC | |||||||
| Total free cash flow |
The net present value (NPV) of this replacement project is:
-$6,159,620
-$7,391,544
-$7,083,563
-$4,619,715
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