Price Co. is considering replacing an existing piece of equipment. The project involves the following: The new equipment will have a cost of $9,000,000, and it is eligible for 100% bonus depreciation so it will be fully deprecated at t = 0 The old machine was purchased before the new tax law, so it is being depreciated on a straight-line basis. It has a book value of $200,000 (at year 0) and four more years of depreciation left ($50,000 per year). The new equipment will have a salvage value of $0 at the end of the project's life (year 6). The old machine has a current salvage value (at year 0) of $300,000 Replacing the old machine will require an investment in net operating working capital'(NOWC) of $30,000 that will be recovered at the end of the project's life (year 6). The new machine is more effident, so the firm's incremental earnings before interest and taxes (EBIT) will increase by a total of $300,000 in each of the next six years (years 1-6). Hint: This value represents the difference between the revenues and operating costs (including depreciation expense) generated using the new equipment and that earned using the old equipment. The project's cost of capital is 13%. The company's annual tax rate is 25%. Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Initial investment EBIT - Taxes Depreciation + Salvage value - Tax on salvage -NOWC Recapture of NOWC Read Total free cash flow The net present value (NPV) of this replacement project is: The net present value (NPV) of this replacement project is: -$5,628,323 -$4,221,242 -$4,784,075 -$6,472,571