The weighted average cost of capital is 11%

Developing Relevant Cash Flows for Part-Time Student Company's Machine Renewal or Replacement Decision Meloni, che financial officer of Part-Time Student Company (PTS). expects the firm's et profits after year to be as shown in the following the for the next Netpos where $100,000 $150.000 $200,000 $250,000 $320,000 Mclovin is beginning to develop the relevant cash flows meded to analyze whether to renew or replace PTSC's only depreciable , a machine that originally cost $30,000, has a current book value of ner, and can now be sold for $20,000. (Note: Because the firm's only depreciable and is fully depreciated--its book value is no t expected net profits after ses qualis Operating cash inflows) He estimates that at the end of 5 years. Mclovin plans to use the following information to develop the relevant cash flows for each of the weatives Alternative Renew the existing machine at a total depreciable cost of 590,000. The renewed machine would have a yea le life and deprecated under MACRS using a year recovery period. Renewing the machine would result in the following projected revenues and expenses (excluding depreciation); 1.175.000 Revenue Expenses (excluding depreciation) $1,000,000 S801,500 884,200 1,300.000 918,100 1,425,000 943,100 1,550,000 96 100 The renewed machine wood result in an increased investment of $15.000 in networking capital. At the end of years, the machine could be sold to set 58,000 before taxes. Alternative 2 Replace the existing machine with a new machine costing $100,000 and requiring installation costs of 10,000, The new machine would have a year wable life and be depreciated under MACRS using a 5-year recovery period. The firm's projected events and expenses (excluding depreciation of it quires the machine, would be as follows 2 - $1.000.000 1.175.000 1.300.000 1.425.000 Expenses(excluding depreciation) $764.500 839,800 914.900 99.00 998.900 The new machine would result in an increased investment of $22,000 in net working capital. At the end of 5 years, the new machine could be sold to net $25,000 before taxes. The weighted average cost of capital will be given to your group when you email me or provide the names of your group to me in class, the marginal tax rate is 40%. Find the NPV, IRR, MIRR, payback and discounted payback for both alternatives. Which alternative should be selected? Explain