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PC Shopping Network may upgrade its modem pool. It last upgraded 2 years ago, when it spent $ 9 0 million on equipment with an
PC Shopping Network may upgrade its modem pool. It last upgraded years ago, when it spent $ million on equipment with an assumed life of years and an assumed salvage value of $ million for tax purposes. The firm uses straightline depreciation. The old equipment can be sold today for $ million. A new modem pool can be installed today for $ million. This will have a year life and will be depreciated to zero usinf straightline depreciation. The new equipment will enable the firm to increase sales by $ million per year and decrease operating costs by $ million per year.At the end of years the new equipment will be worthless. Assume the firm's tax rate is and the discount rate for the projects of the sort is A What si the net cash flow at the time if the old equipment is replacced? B Waht are the incermental cash flows in years; C What is the NPV of the replacement project? D What is the IRR of the replacement project?
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