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{Estimated time allowance: 40-50 minutes] Easy-Chair Corp. is considering replacing its existing equipment that is used to produce comfort reciine chairs. This existing equipment was purchase 2 years ago at a base price of $100,000. Installation costs at the time for this old equipment were $5,000. The existing equipment is considered a 5-year class for MACRS. The existing equipment can be sold today for $40,000 and for $0 in 5 years. The new equipment has a purchase price of $200,000 and is also considered a 5-year class for MACRS. lnstaiiation costs for the new equipment are $10,000. It is estimated that this equipment can be sold in 5 years [end of project} for $20,000. This new equipment is more efficient than the existing one and thus savings before taxes using the new machine are $20,000 a year. This new equipment will also require additional working capital today of $12,000; this investment will be recovered at the end of the project in year 5. The company's marginal tax rate is 2096 and the cost of capital is 1096. What is the NPV of this replacement project? The following 6 questions reach the value for the answer. MACRS Fixed Annual Expense Percentages by Recovery Class Year 3-Year S-Year ?-Year 10- 15- Year Year 1 33339620009614.299610.00965.0096 2 44.459632.009624.499618.00969.5096 3 14.819619.20961?.499614.40968.5596 4 14196 11.5296123499611529612096 5 11529689396 9.2296 6.9396 6 5.2696 8.9396 2.3296 6.2396 9' 8.9396 6.5596 5.9096 8 4.4596 6.5596 5.9096 9 6.5696 5.9196 10 6.5596 5.9096 11 3.2896 5.9196 12 5.9096 13 5.9196 14 5.9096 15 5.9196 16 2.9596 For your answer, round to the nearest doliar, do not enter the $ sign, use commas to separate thousands, use a negative sign in front of first number is the cash flow is negative {do not use parenthesis to indicate negative cash flows]. For example, if your answer is $3,005.82 then enter 3,006; if your answer is -$1,200.25 then enter For vour answer, round to the nearest dollar, do not enter the $ sign, use commas to separate thousands. use a negative sign in front of first number is the cash flow is negative [do not use parenthesis to indicate negative cash flows]. For example, if your answer is $3,005.51? then enter 3,006; if your answer is $1,200.25 then enter 4.200 1. What is the initial outlawr {ID} for this project - the project cash flows at time = D? [:] y 2. What is the free cash flow {FCF} for vear 1 of this replacement project? :] Q; 3. What is the free cash flow [FCFj for year 2 of this replacement project? C] x 4. What is the net operating profit plus incremental depreciation for year 5 of this replacement project? [:] g 5. What is the free cash flow {FCF} for year 5 of this replacement project? - a; a. What is the NW of this replacement project? _ r