The weighted average cost of capital is 11%

Developing Relevant Cash Flows for Part-Time Student Company's Machine Renewal or Replacement Decision Mclovin, chief financial officer of Part-Time Student Company (PTSC), expects the firm's nel protafler are for the next 5 years to be as shown in the following table. Year Net profits after taxes $100.000 $150,000 $200 000 $250.000 $320.000 M ovie is being to develop the relevant cash flows needed to analyze whether to renew or replace PTSC's only depreciablet, machine that originally cost $30,000, has a current book value of zero, and can now be sold for $20,000. (Note: Because the firm's only depreciable is fully deprecated its book value is zero---its expected net profits after taxes equalis operating cash inflows.) He estimates that at the end of 5 years Melavin plans to use the following information to develop the relevant cash flows for each of the alternatives. Alternative Renew the existing machine at a total depreciable cost of $90,000. The renewed machine would have a 5-year usable life and depreciated under MACRS using a 5-year recovery period. Renewing the machine would result in the following projected revenues and expenses (excluding depreciation) Year Revenue Expenses (excluding depreciation) $1,000,000 $801,500 1,175,000 884,200 1,300,000 91,100 1,425,000 943,100 1,550,000 968.100 The renewed machine would result in an increased investment of $15,000 in networking capital. At the end of 5 years, the machine could be sold to net $8,000 before taxes Alternative Replace the existing machine with a new machine costing $100,000 and requiring installation costs of $10,000 The new machine would have a 5-year usable life and be depreciated under MACRS using a year recovery period. The firm's projected revenue and expenses (excluding depreciation if it acquires the machine, would be follows Year Revenue $1,000,000 1,175,000 1,300,000 1,425,000 1,550,000 Expenses(excluding depreciation) 5764,500 839,800 914,900 989,900 998,900 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