PC Shopping Network may upgrade its modern pool. It last upgraded 2 years ago, when it spent $140 million on equiptment with an assumed life of 5 years and an assumed salvage value of $16 million for tax purposes. The firm uses straight-line depreciation. The old equipment can be sold today for $80 million. A new modern pool can be installed today for $150 million. This will have a 3-year life and will be depreciated to zero using straight-line depreciation. The new equipment will enable the firm to increase sales by $25 million per year and decrease operating costs by $10 million per year. At the end of 0 years, the new equipment will be worthiness. Assume the firms tax rate is 35% and the discount rate for projects of this sort is 10%.

a. What is the net cash flow at time 0 if the old equipment is replaced? 2 decimals

Net cash flow: million

b. What are the incremental cash flows in years 1, 2, and 3? 2 decimals

Incremental cash flow: million per year

c. What are the NPV and IRR of the replacement project? 2 decimals

NPV: million

IRR: %