Question 1: The management of Yuen Fatt Furniture is considering replacing one of its wood lathe machines used in its production division. The existing machine was purchased ten years ago at an installed cost of $90,000.00. The machine had an expected life of fifteen years at the time it was purchased and it was estimated then that its salvage value would be zero at the end of the fifteen years. The machine is being depreciated on a straight-line basis. The existing machine can be sold today for $10,000.00 The production manager reports that a proposed new machine can be purchased at the following costs: Invoiced price of new machine Installation cost $110,000.00 $10,000.00 The new machine has an expected useful life of five years. This machine is also being depreciated on a straight-line basis towards a zero salvage value. It is expected to reduce labour, maintenance and electricity expenses cutting operating costs from S75,000.00 to $48,000.00 per annum. Best estimates obtained today indicate that the new machine can be sold off for $5,000.00 at the end of its useful life. machine is accepted, t is expected that there would in changes in the working capital requirement. Inventory levels will increase by $45,000.00; accruals will increase by $5,000.00 and accounts payable will increase by $25,000. The investment in working capital is expected to be fully recovered at the end of its project's life The company uses discounted cash flow techniques to evaluate capital replacement decisioin and its cost of capital is 10%. Assume that the company's tax rate is at 30%, accounting and tax rates for depreciation of assets to be equal and tax expense is paid in the year it is incurred. Is the replacement viable? (Hint: Use NPV and IRR to decide)