Cosmo is beginning to develop the relevant cash flows needed to analyze whether to renew or replace Newman's only depreciable asset, a machine that originally cost $30,000, has a current book value of zero, and can now be sold for $20,000. (Note: Because the firm's only depreciable asset is fully depreciated---its book value is zero--its expected net profits after taxes equal its operating cash inflows.) He estimates that at the end of 5 years, the existing machine can be sold to net $2,000 before taxes. Cosmo plans to use the following information to develop the relevant cash flows for each of the alternatives. Alternative 1 Renew the existing machine at a total depreciable cost of $90,000. The renewed machine would have a 5-year usable life and depreciated under straight line using a 5year recovery period (See depreciation schedule on the next page). Renewing the machine would result in the following projected revenues and expenses (excluding depreciation): The renewed machine would result in an increased investment of $15,000 in net working capital. At the end of 5 years, the machine could be sold to net $8,000 before taxes. Alternative 2 Replace the existing machine with a new machine costing $100,000 and requiring installation costs of $10,000. The new machine would have a 5 -year usable life and be depreciated under straight line using a 5-year recovery period. The firm's projected revenues and expenses (excluding depreciation), if it acquires the machine, would be as follows