please help solve the following

Table 11.4 Degnan Dance Company, Inc., a manufacturer of dance and exercise apparel, is considering replacing an existing piece of equipment with a more sophisticated machine. The following information is given. Facts Existing Machine Cost = $100,000 Purchased 2 years ago Proposed Machine Cost = $150,000 Installation = $20,000 Depreciation using MACRS over Depreciation-the MACRS a 5-year recover schedule Current market value = $105,000 Five year usable life remaining 5-year recovery schedule will be used Five year usable life expected Earnings before Depreciation and Taxes Existing Machine Year 1 $160,000 Proposed Machine Year 1 $170,000 2 150,000 2 170.000 140,000 170,000 140,000 4 170,000 5 140,000 5 170,000 The firm pays 40 percent taxes on ordinary income and capital gains.. 1) Calculate the book value of the existing asset being replaced. (See Table 11.4) 2) Calculate the tax effect from the sale of the existing asset. (See Table 11.4) 3) Given the information in Table 11.4, compute the initial investment. 4) Calculate the incremental depreciation. (See Table 11.4), 5) Calculate the incremental earnings before depreciation and taxes. (See Table 11.4), 6) Given the information in Table 11.4, compute the incremental annual cash flows. 7) Summarize the incremental after-tax cash flow (relevant cash flows) for years t=0 through t-5. (See Table 11.4) 8) What is the payback on this replacement decision. 9) Assuming a WACC of 10%, calculate the net present value. 10) Calculate the Internal Rate of Return. 11) Replace or Reject? Why? 3 4 SHOW YOUR WORK