Question 10 (10 points) Listen Foxglove Corp., an all equity firm, is faced with an investment project. The following information is associated with this project. In Year 1, Net Income is $50,000 and the MACRS Depreciation rate is 33%. In Year 2, Net Income is $60,000 and the MACRS Depreciation rate is 45%. In Year 3, Net Income is $70,000 and the MACRS Depreciation rate is 15%. In Year 4. Net Income is $60,000 and the MACRS Depreciation rate is 7%. Assume no interest expenses and a zero tax rate. The project involves an initial investment of $100,000 in equipment that falls in the 3- year MACRS class and has an estimated salvage value of $15,000. In addition, the company expects an initial increase in net working capital of $5,000 which will be recovered in year 4. The cost of capital for the project is 12 percent. What is the project's net present value? (Round your final answer to the nearest whole dollar.) $153,840 $159,071 $162,409 $168,604 $182,344 Big-Pear Corp. is considering replacing its existing equipment that is used to produce smart cell phones. This existing equipment was purchase 3 years ago at a base price of $58. Installation costs at the time for the machine were $7. The existing equipment is considered a 5-year class for MACRS. The existing equipment can be sold today for $49 and for $29 in 3 years. The new equipment has a purchase price of $134 and is also considered a 5-year class for MACRS. Installation costs for the new equipment are $8. The estimated salvage value of the new equipment is $80. This new equipment is more efficient than the existing one and thus savings before taxes using the new equipment are $15 a year. Due to these savings, inventories will see a one time reduction of $4 at the time of replacement. The company's marginal tax rate is 22% and the cost of capital is 12%. For this project, what is the incremental cash flow in year 1? Show your answer to the nearest $.01. Do not use $, or % signs in your answer. MACRS Fixed Annual Expense Percentages by Recovery Class Year 3-Year 5-Year 7-Year 10-Year 15-Year 20.00% 14.29% 10.00% 5.00% 33.33% 44.45% 14.81% 9.50% 32.00% 24.49% 18.00% 19.20% 17.49% 14.40% 8.55% 7.41% 7.70% 11.52% 12.49% 11.52% 11.52% 8.93% 9.22% 6.93% 5.76% 8.93% 7.37% 6.23% 8.93% 6.55% 5.90% 1 3 TSG7 4 5 6