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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 2 years ago, when it spent $90 million on equipment with an assumed life of 5 years and an assumed salvage value of $30 million for tax purposes. The firm uses straight-line depreciation. The old equipment can be sold today for $90 million. A new modem pool can be installed today for $180 million. This will have a 3-year life and will be depreciated to zero usinf straight-line depreciation. The new equipment will enable the firm to increase sales by $29 million per year and decrease operating costs by $12 million per year.At the end of 3 years the new equipment will be worthless. Assume the firm's tax rate is 30%, and the discount rate for the projects of the sort is 14%. A. What si the net cash flow at the time 0 if the old equipment is replacced? B. Waht are the incermental cash flows in years; 1,2,3 C. What is the NPV of the replacement project? D. What is the IRR of the replacement project?

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