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Question 6: ABC Co. is considering replacing an old computerwith a new one. The old one was purchased 1 year ago for $600,000.It is depreciated strait-line to zero over 6 years. It is expectedto be worth $10,000 at the end of its 6-year life. If ABC sells ittoday, ABC should receive $300,000 for the computer. The newcomputer costs $750,000. It has a life of 5 years and will bedepreciated strait-line to zero over its 5-year life. It isexpected to be worthless at the end of its 5-year life. The newgenerator is expected to reduce the operating costs by $200,000 peryear. There is no change in net working capital. The discount rateof this replacement project is 15%, and the tax rate is40%. Year12345Cost SavingsDepreciationNewOldIncrem. DepEBITTaxesNIYear 0Cost of new computer =After-tax cash flows of old computer sale = Incremental net capital spending =Years 1-4Operating cash flow =Year 5Operating cash flow =After-tax cash flows of old computer sale =Year012345OCFNCSDNWCCFFANPV =