PC Shopping Network may upgrade its modem pool. It last upgraded2 years ago, when it spent $105 million on equipment with anassumed life of 5 years and an assumed salvage value of $11 millionfor tax purposes. The firm uses straight-line depreciation. The oldequipment can be sold today for $80 million. A new modem pool canbe installed today for $150 million. This will have a 3-year lifeand will be depreciated to zero using straight-line depreciation.The new equipment will enable the firm to increase sales by $25million per year and decrease operating costs by $10 million peryear. At the end of 0 years, the new equipment will be worthless.Assume the firm’s tax rate is 35% and the discount rate forprojects of this sort is 10%. a. What is the net cash flow at time0 if the old equipment is replaced? (Negative amounts should beindicated by a minus sign. Do not round intermediate calculations.Enter your answer in millions rounded to 2 decimal places.) b. Whatare the incremental cash flows in years 1, 2, and 3? (Do not roundintermediate calculations. Enter your answer in millions rounded to2 decimal places.) c. What are the NPV and IRR of the replacementproject? (Do not round intermediate calculations. Enter the NPV inmillions rounded to 2 decimal places. Enter the IRR as a percentrounded to 2 decimal places.)