he Bigbee Bottling Company is contemploting the replacement of one of as bottling machines with a newer and more effoent one. The old machine has a book value of $600,000 and a emeining usofut life of 5 years. The firm does not expect to realize any return from scrapping the old machine in 5 years, but it can sell it now to another firm in the industry for 295, 000. The old machine is being depreciated by $120,000 per year, using the straght-line method. The new machine has a purchase price of $1,125,000, an estumated useful lfe of $ years, and an estimated salvage value of $125,000. The new machine is eligible for 100% bonis leprecation at the time of purchase. It is expected to econornure on electnc power usage, labat, and repair conts, as well as to redace the number of defective bottles. In total, an annual avings of 5250,000 will be realized f the new machine is installed. The companys marpinal tax rate is 25%, and is has a 12% WACC. a. What initial cash outloy is required for the new machine after bonus depreciation is consideredr Cash outlow should be indicated by a manus sign, Round your answer to the nearest dokiar. s b. Calculate the change in the annual depteciation expense if the replacement is made. Negative change values, if any, should be indicated by a manus sign. Round your answers to the nearest dollar: c. What are the incremental cash nows in Years 1 through 57 flound your answiers to the nearest dollar d. Should the fam purchase the new machine? e. In general, haw would each of the following factors affect the investment decision, and how should each be treated? 1. The expected lle of the existing machine decreases. Thic him miachine int tock this before duet to the ielative of the cath llows atributable to is. should be made. 2. The WMCC is not constant but is increasing as Bigbee adds inore projects inte its capital budont for the veac