L U RE the Book Replacement Analysis REPLACEMENT ANALYSIS The Bigbee Bottling Company is contemplating the replacement of one of its botting machines with a newer and moreficient one. The old machine book of $650,000 and remaining of years. The form does not expect to realize any return from scrapping the old machine is 5 years, but it can sell it now to another in the industry for $250,000. The old machine is being deprecated by $10,000 per yeasing the straight- line method The new machine has a purchase price of $1,200,000, an estimated useful life and MACRS clause of years, and an estimated salvage value of $10,000. The applicable depreciation rates are 70%. , 195, 124, 115, and 6%. It is expected to economie on electric power usage, labor, and repair costs, as well as to reduce the number of defective botes. In total, an annual swings of $40,000 will be read the new machine is installed The company's marginal tax rate is 35%, and it has a 12% WACC. a. What initial cash outlay is required for the new machine? Round your answer to the nearest dollar Negative amount houdt indiewed by a sig c at made and your answers to the nearest dollar b. Calculate the annual depreciation allowances for both machines and compute the change in the annual depreciation expens if the Year Depreciation Depreciation Change in Allowance. Allowance, Old Depreciation What are the incremental net cash flows in Years 1 through 57 Round your answers to the Year 4 Year 5 Year 1 Year 3 Year 2 d. Should the firm purchase the new machine? Support your answer. The input in the box below will not be graded, but may be reviewed and considered by your instructor End-of-Chapter Problems - Cash Flow Estimation and Risk Analysis c. What are the incremental net cash flows in Years 1 through 57 Round your answers to the nearest dollar Year 1 Year 2 Year 3 Year 4 Years d. Should the firm purchase the new machine? -Select Support your answer. The input in the box below will not be graded, but may be reviewed and considered by your instructor e. In general, how would each of the following factors affect the investment decision, and how should achbereted? 1. The expected life of the existing machine decreases. The input in the box below will not be graded, but may be reviewed and considered by your instructor 2. The WACC is not constant, but is increasing as Bigbee adds more projects into its capital budget for the year. The input in the box below will not be graded, but may be reviewed and considered by your instructor