Replacement Cost: Calculate the NCF, NPV, IRR, & MIRR

Green Moose Industries is a company that produces iGadgets, among several ocher products. Suppose that Green Moose Industries considers replacing.ts tfd machine used to make iGadgets with a more efficient one, which would cost $1,800 and require $250 annually m operating costs except depreciation After tax salvage value of the old machine is $600, while its annual operating costs except depreciation are $1,100. Assume that, regardless of the age of the equipment. Green Moose Industries's sales revenues are fixed at $3,500 and depreciation on the old machine is $600. Assume also that the tax rate is 40% and the project's risk-adjusted cost of capital, r, is the same as weighted average cost of capital (WACC) and equals 10%. Based on the data, net cash flows (NCFs) before replacement are______, and they are constant over four years. Although Green Moose Industries's NCFs before replacement are the same over the 4-year penod, its NCFs after replacement vary annually. The following table shows depreciation rates over four years. Complete the following table and calculate incremental cash flows in each year. Next evaluate the incremental flow's by calculating the net present value (NPV), the internal rate of return (IRR), and the modified IRR (MIRR). Assume again that the cost of financing the new project is the same as the WACC and equals 10%. Based on the evaluation, replacing the old equipment appears to be a______decision because_______