Section 2: Short Questions (70'): Q5 (bonus question 16'): UMAC Net. Corp may need to upgrade its server. It last upgraded 2 years ago, when it spent $110 million on equipment with an assumed life of 6 years. The firm uses straight-line depreciation. The old equipment can be sold today for $100 million. A new modem pool can be installed today for $150 million. This will have a 3-year life and will be depreciated to zero using straight-line depreciation. The new equipment will enable the firm to increase sales by $25 million per year and decrease operating costs by $10 million per year. At the end of 3 years, the new equipment will be worthless. Assume the firm's tax rate is 35% and the discount rate for projects of this sort is 10%(16') a. What is the net cash flow at year O if the old equipment is replaced? (4") b. What are the cash flows for year 1, year 2, and year 3, respectively(6') c. What are the NPV and IRR of the replacement project? (6)