here). . 1 (4) Techno Corporation is considering replacing an existing hoist with its useful life time is 2 years. It is depreciated under a straight-line depreciation method over 5 years recovery period. Hoist N costs $54,000 to purchase and $6000 to install. It has 2 years usable life and will be depreciated under a straight-line depreciation method using 2 years recovery period. Suppose the purchase of hoist N would result in a $6,000 increase in net working capital. The pro- jected profits before depreciation and taxes with hoist N and the existing hoist are given in the following table: Profits before depreciation and taxes in ($) Year with hoist N with existing hoist 22,000 14,000 2 24,000 14,000 The existing hoist can currently be sold for $18,000 and will not incur any removal or other costs. At the end of 2 years, the existing hoist can be sold to net $12,625 before taxes. Hoists N can be sold at $44,000 before taxes at the end of the 2-year period. The firm is subject to a 40% tax rate on both ordinary income and capital gain. The company can raise funds to finance the initial investment via 50% debt and 50% equity. The company's current bond is traded at a price B = 800. It has a face value F 1000 and a coupon rate c = 10%. The bond's maturity is 5 years. The company's current stock is traded at a price P = 100. Its expected dividends is D = 10 and dividends are expected to grow at a constant rate 9 = 16.4%. Answer the following questions: (a) Calculate the initial investment in this replacement. (b) Determine the incremental operating cash inflows associated with the proposed machine replacement. (c) Compute the terminal cash flow associated the proposed ma- chine replacement. (d) Evaluate whether the company should replace its old machine by the new one using the net present value method