Suppose OfficeMax Inc. wants to replace an existing printer with a new high-speed multi-function copier. The existing printer was purchased twelve years ago at a cost of $30,000. The printer is being depreciated using straight line basis assuming a useful life of 15 years and zero book value. If the existing printer is not replaced, its estimated market value is $2,000 at the end of its useful life. If it is replaced, it will be sold to another company immediately. The current market value of the printer is $4,000, which is below its current book value. The new copier will cost $42,000 in total, including $5,000 freight and installation fee. It will be depreciated on a straight-line basis over 3 years with zero book value. Over its life, it will reduce labor and raw usage sufficiently to cut annual operating costs from $28,000 to $15,000. It is estimated that the new copier can be sold for $8,000 at the end of the three year. The OfficeMax Inc.'s tax rate is 35%. OfficeMax Inc.'s CFO set the project's cost of capital at 12%. Net working capital requirements will increase by $6,000 at the time of replacement. The working capital remains the same during the three years and will be freed up when the project ends. The new copier will begin operations immediately after the replacement is made, and the operating cash flows will occur at the end of each year. (a) Compute the initial investment outlay for this replacement project (CF0). (4 marks) (b) Should the project be accepted on the basis of NPV analysis? (9 marks) (c) What is the advantage of a rights issue compared to a public issue of shares? (d) Explain the 'separation theorem'. (6 marks) (6 marks)