Suppose we are thinking about replacing an old computer with a new one. The old one...

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Suppose we are thinking about replacing an old computer with anew one. The old one cost us $1,350,000; the new one will cost,$1,610,000. The new machine will be depreciated straight-line tozero over its five-year life. It will probably be worth about$350,000 after five years. The old computer is being depreciated ata rate of $270,000 per year. It will be completely written off inthree years. If we don’t replace it now, we will have to replace itin two years. We can sell it now for $470,000; in two years, itwill probably be worth $125,000. The new machine will save us$295,000 per year in operating costs. The tax rate is 35 percent,and the discount rate is 10 percent. a.1 Calculate the EAC for theold computer and the new computer. (Negative amounts should beindicated by a minus sign. Do not round intermediate calculationsand round your final answers to 2 decimal places. (e.g., 32.16))a.2 What is the NPV of the decision to replace the computernow?

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Suppose we are thinking about replacing an old computer with anew one. The old one cost us $1,350,000; the new one will cost,$1,610,000. The new machine will be depreciated straight-line tozero over its five-year life. It will probably be worth about$350,000 after five years. The old computer is being depreciated ata rate of $270,000 per year. It will be completely written off inthree years. If we don’t replace it now, we will have to replace itin two years. We can sell it now for $470,000; in two years, itwill probably be worth $125,000. The new machine will save us$295,000 per year in operating costs. The tax rate is 35 percent,and the discount rate is 10 percent. a.1 Calculate the EAC for theold computer and the new computer. (Negative amounts should beindicated by a minus sign. Do not round intermediate calculationsand round your final answers to 2 decimal places. (e.g., 32.16))a.2 What is the NPV of the decision to replace the computernow?