Sampson Corporation is contemplating the purchase of a new high-speed widget grinder to replace the existing grinder. The existing grinder was purchased two years ago at an installed cost of $60,000; it was being depreciated under MACRS, using a five year recovery period. The existing grinder is expected to have a usable life of five more years. The new grinder has a cost of $105,000 and requires $5,000 in installation costs; it has a five year usable life and would be depreciated under MACRS, using a five year recovery period. Sampson can currently sell the existing grinder for $70,000 without incurring any removal and cleanup costs. To support theincreased business resulting from the purchase of the new grinder, accounts receivable would increase by $40,000, inventories by $30,000 and accounts payable by $58,000. At the end of five years, the existing grinder would have a market value of zero; the new grinder would be sold to net $29,000 after removal and clean up costs and before taxes. The firm is subject to a 40% tax rate. The estimated earnings before interest, taxes, depreciation , and amortization over the five years for both the new and the existing grinder are shown below. DEPRECIATION SCHEDULE:Year 1- 20%Year 2- 32%Year 3- 19%Year 4- 12%Year 5- 12%Year 6- 5% EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION:YEAR! ! NEW GRINDER! ! EXISTING GRINDER1! ! $43,000! ! ! $26,0002! ! $43,000! ! ! $24,0003. ! ! $43,000! ! ! $22,0004. ! ! $43,000! ! ! $20,0005. ! ! $43,000! ! ! $18,000QUESTIONS:1. Calculate the initial investment associated with the replacement of the existing grinder bythe new one.2. Calculate the operating cash flows associated with the proposed grinder replacement (besure to consider the depreciation in year 6).3. Calculate the terminal cash flow expected at the end of year 5 from the proposed grinderreplacement (assume change in working capital is reversed from year 1).4. Calculate the incremental cash flows associated with the new grinder.5. Calculate Net Present Value using a discount rate of 8%. Should Sampson move forwardwith the new grinder? Explain.! !