Score: 0 of 1 pt 1 of 1 (0 complete) HW Score: 0%, 0 of P11-30 (book/static) Question Help Integrative Investment decision Holiday Maracturing is considering the replacement of an existing machine. The new machine costs $1.25 million and requires instalation costs of $150.000. The existing machine can be sold currently for $191,000 before taxes. It is 2 years old, cost $802.000 now, and has a $384.960 book value and a remaining useful le 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. It is held for 5 more years, the machine's market value at the end of year 5 will be so Over its 5 year it, the new machine should reduce operating costs by $341,000 per year. The now machine will be depreciated under MACRS using a 5-year recovery period. The new machine can be sold for $199,000 net of removal and cleanup costs at the end of 5 years. An increased investment in not working capital of $21,000 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 0.1% cost of capital and is subject to a 40 tax rate a. Develop the nel cash flows needed to analyze the proposed replacement b. Determine the not present value (NPV) of the proposal c. Determine the internal rate of retum (IRR) of the proposal d. Make a recommendation to accept or reject the replacement proposal and your answer e. What is the highest cost of capital that the firm could have and shil accopte proposal? a. Develop the relevant cash flows needed to analyze the proposed replacement Calculate the initial investment (Round to the nearest dollar) SL Cost of the new machine Installation cos! Installed cost of new asset Enter any number in the edit fields and then click Check Answer 17 Parts ning Clear All Check Answer i Data Table Rounded Depreciation Percentages by Recovery Year Using MACRS for First Four Property Classes Percentage by recovery year Recovery year 3 years 5 years 7 years 10 years 33% 20% 14% 10% 45% 32% 25% 18% 15% 19% 18% 14% 7% 12% 12% 12% 12% 9% 5% 9% 8% 9% 4% 6% 6% 10 6% 4% Totals 100% 100% 100% 100% *These percentages have been rounded to the nearest whole percent to simplify calculations while OWN 9% 7% 11 Print Done