LoRusso Co. is considering replacing an existing piece of equipment The project involves the following . The new equipment will have a cost of $9,000,00D, and it will be depreciated on a straight-line basis over a period of six years (years 1-6). . The old machine is also being depreciated on a straight-ine basis. It has a book value of $200,00D (at year O) and four more years of depreciation left ($50,000 per year) The new equipment will have a salvage value of $0 at the end of the project's life (year 6). The oldmachine has a current salvage value (at year 0) of 30D,DDD . .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 The new machine is nextsix years (years 1-6). Hint: This value represents the difference between the revenues and operating costs (indluding depreciation expense) generated using the new equipment and that eamed using the old equipment The project's oost of capital is 13%. The company's annual tax rate is 30%. more efficient, so the firm's incremental eamings before interest and taxes (EBIT) wil increase by a tatal of $40D, DDD in each of the . Complete the following table and compute the incremental cash flows associated with the replacement of the old equipment with the new equipment Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Initial investment ,000,00o EBIT -Taxe +New depreciation - Old depreciation $4DD,0DD Salvage value - Tax on salvage - NWC +Recapture of NWC Total free cash low $1,780,00D The net present value (NPV) of this replacement project is O -$1,345,70D O -$2,053,406 O -$1,794,266 O -$2,153,119