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

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Finance

Suppose we are thinking about replacing an old computer with anew one. The old one cost us $1,580,000; the new one will cost,$1,897,000. The new machine will be depreciated straight-line tozero over its five-year life. It will probably be worth about$375,000 after five years. The old computer is being depreciated ata rate of $320,000 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 $513,000; in two years, itwill probably be worth $147,000. The new machine will save us$326,000 per year in operating costs. The tax rate is 21 percent,and the discount rate is 8 percent. a-1. Calculate the EAC for thethe old computer and the new computer. (A negative answer should beindicated by a minus sign. Do not round intermediate calculationsand round your answers to 2 decimal places, e.g., 32.16.) a-2. Whatis the NPV of the decision to replace the computer now? (A negativeanswer should be indicated by a minus sign. Do not roundintermediate calculations and round your answer to 2 decimalplaces, e.g., 32.16.)

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