Task 3: The firm is considering the replacement of old equipment with new equipment. The characteristics of the old and new equipment are given below: 25,000 5 years 5 years Old Equipment New Equipment Current book value 5,000 Current market value 2,000 Acquisition cost Remaining life Useful life Annual sales 20,000 Annual sales Cash operating expenses (per year) 14,000 Cash operating expenses (per year) Annual depreciation expense 1,000 Annual depreciation expense Book value (end of year 5) 0 Book value (end of year 5) Expected salvage value (end of year 5) 0 Expected salvage value (end of year 5) If the replacement is made, an additional investment of 3,000 in net working capital will be required. The tax rate is 20%, and the required rate of return on the project is 12%. Calculate the initial cash outlay. 20,000 7,000 5,000 0 4,000 Calculate the incremental after-tax operating cash flows for Years 1 - 5. Calculate the terminal year after-tax non-operating cash flow. | Calculate the project's net present value. Would the replacement project result in added value