In A Pickle Inc., a pickle making and bottling company, has a machine in use that was originally purchased 4 years ago for $300,000. The firm depreciates the machine under 10-year simplified straight-line depreciation (6 years depreciation remaining) to zero. Once removal and cleanup costs are taken into consideration, the expected net selling price for the present machine today will be $100,000.

The company can buy a new machine for a price of $420,000. The proposed machine will qualify for immediate year 0 expensing under 100% bonus depreciation. If the firm acquires the new machine, it will require additional net working capital of $20,000. Replacing the old the machine with the new machine will increase output resulting in $50,000 of extra revenue annually and will reduce annual operating costs by $65,000. The corporate tax rate for the firm is 25%. In A Pickle expects to be able to liquidate the proposed machine at the end of its 4-year usable life for $60,000. The present machine is expected to bring in $20,000 upon liquidation at the end of the same time period. The company expects to recover its net working capital investment upon termination of the project. The firm is subject to a tax rate of 25%.

Please complete the following: (PLEASE EXPLAIN HOW TO CALCULATE THEM IN EXCEL)

1) Calculate the initial investment or outlay for this replacement project.

2) Calculate the relevant operating cash flows for the replacement project analysis.

3) Calculate the terminal cash flow associated with this replacement project.

4) Should In A Pickle Inc. go ahead with this replacement project if the WACC for the project is 12%? Support your decision by finding NPV and IRR for this replacement project.