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The highlighted (green) cells, thanks! This is all the information given. = 4 Discount rate: Tax Rate: Equipment Replacement Analysis enter revenues & inflows as

The highlighted (green) cells, thanks!

This is all the information given.

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= 4 Discount rate: Tax Rate: Equipment Replacement Analysis enter revenues & inflows as positive numbers, expenses & outflows as negative numbers round only where instructed to do so investment years of equipment usage t= = = = 9.4% Part 1: Before replacement 0 I 1 I 2 | 3 | 20.0% Sales Revenue 2,500 2.500 2,500 After Before Expenses other than Depreciation (1.125) (1,125) (1,125) 2,500 2,500 Depreciation (200) (200) (200) 500 1,125 EBIT 1,175 1.175 1.175 2,000 1,600 EBIT After Taxes** 940 940 940 Add back: Depreciation 200 200 200 below 200 Free Cash Flow (Before) 0 1,140 1,140 1,140 Sales Revenue (constant) Expenses other than Depreciation Cost of equipment Expected life of equipment Depreciation (straight line) 2,500 (1,125) (200) 1.175 940 200 1.140 8 Part 2: After replacement Disposal of Old Equipment: see handout Old equipment was depreciated on a straight-line basis (2,000) 510 58 Age of old equipment: 4 Accum. Deprec. On old equip 800 Net Book Value of old equip: 800 Proceeds of sale: 510 Gain/ (LOSS) (290) Tax on Gain (Loss)* round to S *Tax OUTFLOW if Gain *Tax INFLOW if loss ** EBIT * (1-tax rate) *** difference between FCF before new equip, and FCF after Net cost of new Equipment Sale of old equipment Tax on Gain / Loss: Sales Revenue Expenses other than Depreciation Depreciation EBIT EBIT After Taxes Add back: Depreciation Free Cash Flow (After) 2,500 (500) (333) 1,667 1,333 333 1,667 2,500 (500) (333) 1,667 1,333 333 1,667 2,500 (500) (333) 1,667 1,333 333 1,667 2,500 (500) (333) 1,667 1,333 333 1,667 58 (1,432) Part 3: Incremental*** cash flows (1,432) 527 527 527 527 after-before PV of Incremental Cash Flows: Cumulative Cash for Payback: Cumulative PV for Disc. Payback:

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