Please answer by tomorrow morning IM STUCK. check figures at the bottom. UPDATED WITH CLEAR PICTURE PLEASE HELP

Team Problem, Capital Budgeting Otero, Acct 319 Accounting 319 Capital Budgeting Decision (Chapter 21) Team Problem op Cat Cannery is considering the replacement of their existing canning machine with a new canning machine. near the The old machine has been in use for 3 full years. This particular analysis is, therefore, occurring fourth physical year. It is classified as a 7-year ass for tax purpos $50,000 new. be used for 4 more years and has ses, the new been depreciated using MACRS rates. It c market value of the old machine is equal to machine is acquired, the old machine will be sold now. The fair value If the is kept, annual year 1 of the analysis is expected to be $40,000 old machine revenue beginning in the previous year's amount). Operating costs are expected increase by 10% each year. Near the end of four by 5% annually (hat is, over Revenues w more years, the old machine's fair market value is expected to be $4,600. Assume, if the old machine is used for an additional four years, it will be sold, not donated, at the end of that time The new machine has an inv price of s65.000. Shipping costs (o get the machine to our physical location) expected to be $2,500, and setup costs The new ified as 7-year for tax purposes, and will be depreciated using MACRS are expected to be $50,000 the first year, and will increase by 5% a costs the first year are expected to be s7,500, and will increase by 5% annually t near the end of the 4 year of use. Estimated fair If the new machine is acquired, the company expects to se market value at that time is $26,000 The company's tax rate is 30%. Their real discount rate is 6%, and the expected annual rate of inflation over the is 3.78% All cash flows are stated in nominal amounts 1. Calculate Top Cat's nominal interest (discount rate. Round to the nearest whole percent 2. Using nominal cash flow calculat the NPV of keeping the old machine. (Hint: there is no Year 0 cash flow.) Round all cash flows to the nearest dollar 3. Using nominal cash flows, calculate the NPV of buying the new machine. Round all cash flows to the nearest dollar 4. Which, if either, option should Top Cat select? Why? Check figures (work done in Excel): 1.10% 2. $77,004 year 4 undiscounted, net of tax cash flow $28,32s 7; year 4 net of tax cash flow s62.177 year l depreciation tax shield s 4 Hint- the NPVs are very, very close together do you believe it matters? Why or why not