Use the following information to answer the questions below; of Sanad Inc. is considering replacing an existing piece of equipment with a more sophisticated machine. The following information is given. Existing Machine Cost-$100,000 Purchased 2 years ago Depreciation using MACRS Over a 5-year recover schedule Current market value = $105,000 Five year usable life remaining Facts Proposed Machine Cost - $150,000 Installation = $20,000 Depreciation-the MACRS 5-year recovery schedule will be used Five year usable life expected Earnings before Depreciation and Taxes Existing Machine Proposed Machine Year 1 $160,000 Year 1 $170,000 2 150,000 2 170,000 3 140,000 170,000 4 140,000 4 170,000 5 140,000 5 170,000 3 The firm has determined its optimal capital structure, which is composed of the following sources and target market value proportions: Target Market Source of Capital Proportions Long-term debt 30% Preferred stock 5 Common stock equity 65 Debt: The firm can sell a 20-year, $1,000 par value, 9 percent bond for $980. A flotation cost of 2 percent of the face value would be required in addition to the The firm has determined its optimal capital structure, which is composed of the following sources and target market value proportions: Target Market Source of Capital Proportions Long-term debt 30% Preferred stock 5 Common stock equity 65 Debt: The firm can sell a 20-year, $1,000 par value, 9 percent bond for $980. A flotation cost of 2 percent of the face value would be required in addition to the discount of $20. Preferred Stock: The firm has determined it can issue preferred stock at $65 per share par value. The stock will pay an $8.00 annual dividend. The flotation cost stock is $3 per share. Common Stock: The firm's common stock is currently selling for $50 per share. The dividend expected to be paid at the end of the coming year is $5.07. Its dividend payments have been growing at a constant rate for the last five years. Five years ago, the dividend was $3.45. It is expected that to sell, a new common stock issue must be underpriced at $1 per share and the firm must pay $3 per share in flotation costs. The firm pays 40 percent taxes on ordinary income and capital gains. Sanad invests $5,000 in NWC that will be recovered at the final year of the project. Calculate the book value of the existing asset being replaced. Calculate the tax effect from the sale of the existing asset. Calculate the initial investment required for the new asset. Calculate the incremental earnings before depreciation and taxes. Calculate the incremental depreciation. Calculate the incremental after-tax cash flow for years t=0 through t = 5