) The Wolf Pack Company is considering replacing an existing machine with a newer, more efficient version. The old machine was purchased 2 years ago at a cost of $40,000, and this amount was being depreciated under MACRS using a 3-year recovery period. The machine has 3 years of usable life remaining. The new machine that is being considered costs $75,000 and requires $7,500 in installation costs. The new machine would also be depreciated under the MACRS 3-year recovery period. The firm can sell the old machine for $12,500 without incurring any removal or cleanup costs. The firm pays a tax rate of 40% on ordinary income. The revenues and expenses (excluding depreciation) associated with the old and new machine for the next 3 years are listed in the table below:

New Machine Old Machine

Year Revenue Expenses Revenue Expenses

1 $575,000 $525,000 $475,000 $460,000

2 625,000 535,000 500,000 465,000

3 650,000 550,000 550,000 478,000

calculate the initial outlay associated with the replacement of the old machine

determine the incremental, after-tax operating cash inflows associated with the proposed replacement (be sure to include the relevant depreciation flow in year 4)