Question:

Holliday Manufacturing is considering the replacement of an existing machine. The new machine costs $1.21 million and requires installation costs of $148,000. The existing machine can be sold currently for $175,000 before taxes. It is 2 years old, cost $801,000 new, and a remaining useful life of 5 years. It was being depreciated under MACRS using a 5-year recovery period, and therefore has the final 4 years of depreciation remaining. If it is held for 5 more years, the machine's market value at the end of year 5 will be $0. Over its 5-year life, the new machine should reduce operating costs by $343,000 per year. The new machine will be depreciated under MACRS using a 5-year recovery period. The new machine can be sold for $194,000 net of removal and cleanup costs at the end of 5 years. An increased investment in net working capital of $25,000 will be needed to support operations if the new machine is acquired. Assume that the firm has adequate operating income against which to deduct any loss experienced on the sale of the existing machine. The firm has a 9.4% cost of capital and is subject to a 40% tax rate.

!!! Please show the formulas of the answers you have found using Excel. Please show the solution formulas of the questions on Excel.You can even directly upload the excel document on which you made the solutions. (would be great)!!!

a)Calculate the initial investment.(round the nearest dollar.)

Cost of the new machine =$________?________

Installation cost =$________?________

Installed cost of new asset =$________?________

Proceeds from sale of existing machine =$________?________

Taxe on sale of existing machine =$________?________

Total after-tax proceeds from sale =$________?________

Increase in net working capital =$________?________

Initial investment =$________?________

Calculate the operating cash flows from the existing machine(Round the nearest dollar.)

Operating Cash Inflows,Year 1=$ ________?________

Operating Cash Inflows,Year 2=$________?________

Operating Cash Inflows,Year 3=$________?________

Operating Cash Inflows,Year 4=$________?________

Operating Cash Inflows,Year 5=$________?________

Operating Cash Inflows,Year 6=$________?________

Calculate the operating cash flows from the new machine(Round the nearest dollar.)

Operating Cash Inflows,Year 1=$________?________

Operating Cash Inflows,Year 2=$________?________

Operating Cash Inflows,Year 3=$________?________

Operating Cash Inflows,Year 4=$________?________

Operating Cash Inflows,Year 5=$________?________

Operating Cash Inflows,Year 6=$________?________

Calculate the Incremental Cash flows. (Round the nearest dollar.)

Year 1=$________?________

Year 2=$ ________?________

Year 3=$ ________?________

Year 4=$ ________?________

Year 5=$ ________?________

Year 6=$ ________?________

Calculate the terminal cash flow. (Round the nearest dollar.)

Proceeds from sale of new asset $=________?________

Tax on sale of new asset $= ________?________

Total proceeds-sale of new asset $= ________?________

Change in net working capital $=________?________

Terminal cash flow $=________?________

b.The net present value is $ ________?________ .(Round the nearest dollar.)

c.The internal rate of return is ________?________%.(Round the nearest dollar.)

d.Make a recommendation to accept or reject the replacement proposal;1 for Accept,0 for Reject: ________?________

e.The highest cost of capital that the firm could have and still accept the proposal is ________?________ %. (Round the nearest dollar.)

!!!!Can you solve the formulas by showing them.!!!!