Halbert$$s department store has recently received the results of a study which suggests that potential sales are being lost because many customers dislike have to use the elevator in Halbert$$s State Street store and prefer to go across the street to Field$$s department store, which has an escalator. Consequently, Halbert$$s is considering the replacement of the elevator with a new escalator. The elevator was purchased $10$ years ago for $$140,000$ and is being depreciated on a straight$-$line to a salvage value of $$40,000$ in $10$ years from now. It can be sold today for $$80,000.$ The escalator can be purchased for $$300,000$ and would be depreciated straight$-$line to a salvage value of $$100,000$ in $10$ years. In addition, Halbert anticipates that having an escalator rather than an elevator will increase sales by $$20,000$ annually and decrease operating expenses by $$5,000$ annually. Variable costs are $60\%$ of the increased in sales. The marginal tax rate is $40\%.$

A$.$ What is the present book value of the elevator?

B$.$ What is the initial cash outflow associated with the replacement of the elevator?

C$.$ What will be Halbert$$s incremental change in annual cash flow if they replace the elevator?

D$.$ If Halbert uses a $12\%$ discount rate to value the project, what is the net present value of the replacement decision? What is the profitability index at $12\%?$

E$.$ If$,$ instead, Halbert uses a $16\%$ discount rate to value the project, what is the net present value of the project? What is the profitability index at $16\%?$