A firm is thinking about replacing a machine. The machine was purchased four years ago for $12,000 and is being depreciated using the 5 year MACRS schedule. That schedule is Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 .2 .32 .19 .12 .11 .06 It can be sold today for $800. If the firm sells the old machine in 5 years it will have no market value. The replacement machine will cost $20,000 and will also be depreciated using the 5 year MACRS schedule. The new machine will increase revenues by $6000 in the first year and will decrease costs by $2000 in the first year. The firm uses only debt and equity to fund its operations. The firm has 1000 bonds outstanding that have a par value of $1000. They currently see for $960 per bond, have 8 years left on their maturity, and have a coupon rate of 10%. They have 25000 shares of stock outstanding and each share sells for $80 per share. The equity has a beta of 1.2, the nominal risk free rate of interest is 5% and the expected real return on the market is 12%. The firm is in the 35% tax bracket. The firm currently has Net Operating Working Capital of $3000 for this project. It expects that number to grow 10% per year over the life of the project. Inflation is expected to be 2% per year. The firm expects to sell the new machine at the end of the 5th year for $2000. Build an excel spreadsheet that determines the NPV, IRR, and Discounted Payback for the machine. In your NPV analysis, use different discount rates for different riskiness of cash flows. For example, the depreciation tax shield is less risky than revenues.