this should be all the options

Consider the case of LoRusso Company The managers of Lorusso Company are considering replacing an existing piece of equipment, and have collected the following information: The new piece of equipment will have a cost of $9,000,000, and it will be depreciated on a straight-line basis over a period of five Years . The old machine is also being depreciated on a straight-line basis. It has a book value of $200,000 (at year C) and three more years of depreciation left (550,000 per year) The new equipment will have a salvage value of so at the end of the project's life (year 5). The old machine has a current sairage value (at year 0) of $300,000 Replacing the old machine will require an investment in net working capital (NWC) of $60,000 that will be recovered at the end of the project's life (year 5) The new machine is more efficient, so the incremental increase in operating income before taxes will increase by a total of $700,000 in each of the next five years (years 1-5). (Hint: This value represents the difference between the revenues and operating costs (including depreciation expense) generated using the new equipment and that earned using the old equipment.) The project's required rate of return is 12% . The company's annual tax rate is 40% Complete the following table and compute the incremental cash flows associated with the replacement or the old equipment with the new equipment Year 1 Year 3 Year 5 Year o Year 2 Year 4 $700,000 Initial Investment Oper Inc. before tax Taxes New depreciation Old depreciation Net salvage value Networking capital Return of net working capital $2,220,000 Total net cash flow The net present value (NPV) of this replacement project is Year o Year 1 Year 2 Year 3 Year 4 Year 5 Initial investment $2,280,000 Oper Inc. before $700,000 $1,800,000 tax $9,000,000 Taxes New depreciation $700,000 Old depreciation Net salvage value Net working capital Return of net working capital Total net cash flow $2,220,000 The net present value (NPV) of this replacement project is Year 4 Year o Year 2 Year 1 Year 3 Year 5 Initial investment $700,000 Oper . Inc. before tax $1,800,000 Taxes $100,000 New $700,000 depreciation Old $9,000,000 deprecation Net salvage value Net working capital Return of net working capital Total net $2,220,000 cash flow Year o Year 1 Year 2 Year 3 Year 4 Year 5 Initial Investment $700,000 Oper inc. before tax Taxes New depreciation Old 40,000 (9,000,000 280,000 60,000 depreciation Net salvage value Net working capital Return of net working capital Total net $2,220,000 cash flow Year o Year 1 Year 2 Year 3 Year 4 Year 5 Initial Investment Oper Inc. before $700,000 tax 40,000 1,800,000 Taxes New depreciation Old depreciation Net salvage value Net working capital Return of net working capital -60,000 280,000 Total net $2,220,000 cash flow Year o Year 1 Year 2 Year 3 Year 4 Years Initial Investment $700,000 Oper Inc. before 280,000 Taxes New depreciation Old depreciation Net salvage value Net working capital Rotum of net working capital 300,000 50,000 1,000,000 $2,220,000 Total net cash flow Year o Year 1 Year 2 Year 3 Year 4 Year 5 Initial Investment $700,000 Oper Inc. before tax Taxes New depreciation Old depreciation Net salvage value Net working capital Return of net working capital 700,000 280,000 260,000 2,280,000 Total net $2,220,000 Year o Year 1 Year 2 Year 3 Year 5 Year 4 Initial investment Oper inc, before $700,000 tax Taxes New depreciation Old depreciation Net salvage value Net working capital Return of net working capital 40,000 60,000 1,800,000 v) -8,800,000 Total net cash now $2,220,000 Year o Year 1 Year 2 Year 3 Year 4 Year 5 ( Initial investment Oper inc, before tax $700,000 Taxes New depreciation Old depreciation Net salvage value Net working capital Retum of net working capital 2,280,000 Total net cash now $2,220,000 40,000 60,000 The net present Value (NPV) of this replacement project is -8,800,000 Complete the following table and compute the incremental cash flows associated with the replacement of the old equipment with the new equipment Year o Year 1 Year 2 Year 3 Year 4 Year 5 Initial investment $700,000 Oper - Inc. before tax V) Taxes New depreciation Old depreciation Net salvage value Net working capital Return of net working capital $1,800,000 $8,800,000 $9,000,000 $280,000 $2,220,000 Total net cash now Year o Year 1 Year 2 Year 3 Year 4 Year 5 Initial Investment Oper inc, before tax $700,000 Taxes New depreciation Old depreciation Net salvage value Networking capital Return of networking capital $1,000,000 $700,000 $2,170,000 $9,000,000 $2,220,000 Totalnet Cath now Year o Year 1 Year 2 Year 3 Year 4 Year 5 Initial $700,000 investment Oper .inc before ta Taxes New depreciation Old depreciation Net salvage value Networking capital Return of $700,000 $2,170,000 51,800,000 $9,000,000 net working capital Total net cash flow $2,220,000 Year o Year 1 Year 2 Year Year 4 Year 5 Initial investment Oper $700,000 ine before Taxes New deprecation Old depreciation Net salvage value Networking capital Return of net working capital $280,000 $1,800,000 $2.170,000 59,000,000 Total net $2,220,000 cash flow Year o Year 4 Year 2 Year 1 Year 3 Year 5 Initial Investment Oper .inc before tax $700,000 Taxes New $2,280,000 depredation Old depreciation Net salvage value Net working capital Return of net working capital $1,800,000 $700,000 $9,000,000 $2,220,000 Total net cash flow -$883,443 Return of net working capital -$750,927 ( -$1,015,959 Total net cash flow -$662,582 The net present value (NPV) of this replacement project is