The answers to the questions must be in excel format $!$ please look at the photo for instructions

ISB had installed an automated teller machine $($ATM$)$ four years ago at its branch.

The ATM cost $$1,200,000$ and was estimated to have a useful economic life of $10$

years. The bank has been depreciating its ATM straight$-$line $($over ten years$)$ to an

estimated book salvage value of $$200,000.$ The current actual market value of the old

ATM is $$300,000.$ The Interactive Teller Machine will cost $$2,000,000$ and have an

expected economic life of $6$ years. The bank plans to depreciate the ITM over five

years using MACRS. The bank believes ITM will attract new customers and is

expected to generate $$500,000$ in new revenues during the first year. Revenues from

these new customers are expected to grow $4\%$ per year over the $6-$year life of the new

ITM. The new ITM will have an annual maintenance cost of $$20,000$ during the first

year and will increase by $3\%$ per year over the annual maintenance costs of the old

ITM. International Sun Bank has a $25\%$ marginal tax rate and has the following

capital structure:

The debt is based on the corporate bond that the company issued several years

ago. The bond has a $10\%$ coupon rate, a par value of $$1,000,$ and a $10-$year maturity

left. Today, the bond is selling for $$900.$ The preferred stock has a par value

of $$25$ with a $$6$ dividend annually. Today, the preferred stock is trading at $$50$ per

share. The common stock is selling for $$64$ per share on the stock market, and the

company is expected to pay a $$4\mathrm{.}0$ dividend per share this year, which has increased

from $$2\mathrm{.}5$ in the last six years.

Part $1$

Compute the net investment required to purchase the ITM.

Compute the annual incremental net cash flows for each year of the project's

expected $6-$year life.

Compute the cost of capital based on the book and market value of the capital

structure.

Compute the net present value of replacing the ATM, assuming the ITM to be

of average risk.

Based on the calculations performed in Questions $1-4,$ should International Sun

Bank purchase the new ITM?

Part II

The bank's board of directors requires a risk$-$adjusted discount rate to evaluate any

investments seen as expanding the bank's services. Please assume that the board

considers the new ITM to fall into this category since it will handle an increased

number of transactions and that the board requires an additional risk premium to be

added when evaluating the project. The bank has estimated that the Beta of this

investment is equal to $1\mathrm{.}25,$ and the rate of return on the market portfolio and risk$-$free

rate are $12\%$ and $4\%,$ respectively.

What is the cost of equity based on the CAPM model?

What is the weighted average cost of capital?

Should the bank purchase the new ITM?