The manager of a company wants to replace its R&D equipment with new equipment. The existing equipment was purchased 5 years ago at a cost of $155,000. At that time, the equipment had an expected life of 10 years with no expected salvage value. The equipment is being amortized on a straight-line basis and has a market value of $27,500. The new equipment can be bought for $175,000 including installation, and, over its 10-year life, it will reduce raw material usage and overhead resulting in R&D costs decreasing from $142,000 to $101,000 for the first 5 years and from $101,000 to $56,000 for the last 5 years. Net working capital requirements will also increase by $42,000 at the time of replacement. It is estimated that the new equipment can be sold for $35,000 at the end of its life. The new equipment will be in the same pool of assets as the old equipment with a capital cost allowance rate of 30%. The company's marginal tax rate is 35%. Since the new equipment's cash flows are relatively certain, the project's cost of capital is set at 15% compared to 10% for an average-risk project. The firm's maximum acceptable payback period is 5 years. Calculate the project's payback (based on before-tax undiscounted cash flows) and identify whether or not the old R&D equipment should be replaced. How many years is the payback period? Based on payback, should the project be accepted or rejected? Calculate the project's payback net present value (NPV) and profitability index and discuss whether or not the old R&D equipment should be replaced.

Please determine the following values:

initial investment in equipment at the beginning of the project__

CCA tax shield __

Lost CCA tax shield __

NPV of the project __

CFO __

C01 __

F01 __

C02 __

F02 __

C03 __

F03 __

Profitability index __

Should the company purchase the new equipment? Calculate the internal rate of return of return (IRR) on the project. If the manufacturing division's ROI is currently 13%, and the company's minimum required return is 9% will the manager likely invest in the project? Why or why not?