S&S Farms has an opportunity to purchase a new, more efficient tractor, the JD 7770, to replace an old tractor, the JD 4440, now in use. The company has hired you as a consultant to help make the decision on the proposed project. S&S will pay you $1,000 for your services. The JD 4440 was purchased five years ago for $150,000 and is being depreciated on a straight-line basis over a ten-year period to a salvage value of zero for tax purposes. The actual salvage value five years from now is expected to be $30,000. The JD 4440 can be sold in the market today for $70,000. The JD 4440 generates $100,000 per year in revenue and the annual operating cost is $60,000 S&S Farms' co-owner, Samantha Smiley has reported that the JD 7770, will cost $275,000 and the company will have to pay $4,000 in modification costs to have a GPS guidance system installed on the tractor before it will be ready to use. It will be depreciated using the 5-year MACRS schedule. If the JD 7770 is purchased, Samantha expects that it will be used for five years and then it will be sold. The expected value of the JD 7770 five years from now is $100,000. Samantha estimates that the JD 7770 will generate $120,000 per year in revenue and the annual operating cost is expected to be $50,000. Due to the complexity of the GPS guidance system, S&S will have to pay $1,000 to train employees on how to use the tractor at the time the tractor is purchased. Due to the higher production of the JD 7770, S&S will need to increase inventories by $3,000 and accounts payable are expected to increase by $1,000. S&S has a cost of capital of 16% and the firm's tax rate is 25 percent. Answer the following questions regarding the proposed replacement project. 5-Year Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 MACRS RATES 20.00% 32.00% 19.20% 11.52% 11.52% 5.76% What is the expected net after-tax cash flow expected from the sale of the JD 4440 at time zero (Year 0)? What is the expected net after-tax training costs for training employees on the use of the new tractor at time zero (Year 0)? What is the expected the net initial investment (NINV) required for the replacement project? What is the expected change in annual revenue for the firm for the first year (Year 1) of the replacement project? What is the expected change in depreciation for the first year (Year 1) of the replacement project? What is the expected net operating cash flow for the first year (Year 1) of the replacement project? What is the expected tax on the sale of the JD 7770 at the end of the final year of the replacement project (Year 5)? What is the expected net after-tax opportunity cost on the JD 4440 at the end of the final year of the replacement project (Year 5)? What is the expected total net cash flow for the final year of the replacement project (Year 5)? 1P