The Gilbert Instrument Corporation is considering replacing the wood steamer it currently uses to shape guitar sides. The steamer has 6 years of remaining life. If kept, the steamer will have depreciation expenses of $650 for 5 years and $325 for the sixth year. Its current book value is $3,575, and it can be sold on an Internet auction site for $4,150 at this time. If the old steamer is not replaced, it can be sold for $800 at the end of its useful life. Gilbert is considering purchasing the Side Steamer 3000, a higher-end steamer, which costs $13,000, and has an estimated useful life of 6 years with an estimated salvage value of $1,300. This steamer falls into the MACRS 5-years class, so the applicable depreciation rates are 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, and 5.76%. The new steamer is faster and would allow for an output expansion, so sales would rise by $2,000 per year; even so, the new machine's much greater efficiency would reduce operating expenses by $1,400 per year. To support the greater sales, the new machine would require that inventories increase by $2,900, but accounts payable would simultaneously increase by $700. Gilbert's marginal federal-plus-state tax rate is 40%, and its WACC is 14%. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet Should it replace the old steamer? The old steamer should be replaced. What is the NPV of the project? Do not round intermediate calculations. Round your answer to the nearest dollar. $ -3874 X B28 Arial fx 10 B < ab Merge v Currency $ 33 Annual sales increase $2,000 34 Annual reduction in operating expenses $1,400 35 Annual increase in pre-tax revenues #N/A 36 #N/A 37 After-tax annual revenue increase 38 39 Step 3: Calculation of annual depreciation tax savings 40 41 New equipment 42 Old equipment 43 Change in annual depreciation 44 45 Annual dpreciation tax savings Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 $650 -$650 $650 $650 $650 $650 $325 -$650 -$650 -$650 -$650 -$325 46 47 Formulas 48 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 49 New equipment #N/A #N/A #N/A #N/A #N/A #N/A 50 Old equipment $650 $650 $650 $650 $650 $325 51 Change in annual depreciation -$650 -$650 -$650 -$650 -$650 -$325 52 #N/A #N/A #N/A #N/A #N/A #N/A 53 Annual depreciation tax savings 54 55 Step 4: Calculation of net present value of replacement 56 57 Initial investment outlay 58 Annual after-tax revenue increase 59 Annual depreciation tax savings 60 Working capital recovery 61 Salvage value on new equipment 62 Tax on salvage value of new equipment 63 Opportunity cost of old equpment 64 Project cash flows 65 66 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Formulas $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 #N/A $1,300 #N/A #N/A $0 $0 $0 $0 $0 #N/A 67 Net present value 68 Should firm replace the old equipment? Formulas #N/A #N/A