The Gilbert Instrument Corporation is considering replacing the wood steamer it currently uses to shape guitar sides. The steamer has 6 years of remaining life. If kept, the steamer will have depreciation expenses of $650 for 5 years and $325 for the sixth year. Its current book value is $3,575, and it can be sold on an Internet auction site for $4,150 at this time. If the old steamer is not replaced, it can be sold for $800 at the end of its useful life.Gilbert is considering purchasing the Side Steamer 3000, a higher-end steamer, which costs $14,000, and has an estimated useful life of 6 years with an estimated salvage value of $1,400. This steamer falls into the MACRS 5-years class, so the applicable depreciation rates are 20.00%, 32.00%, 19.20%, 11.52%, 11.52%, and 5.76%. The new steamer is faster and would allow for an output expansion, so sales would rise by $2,000 per year; even so, the new machine's much greater efficiency would reduce operating expenses by $1,400 per year. To support the greater sales, the new machine would require that inventories increase by $2,900, but accounts payable would simultaneously increase by $700. Gilbert's marginal federal-plus-state tax rate is 40%, and its WACC is 15%.The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below. Open spreadsheet Should it replace the old steamer?The old steamer be replaced. What is the NPV of the project? Do not round intermediate calculations. Round your answer to the nearest dollar.$ fill in the blank 3 10AM6417181024262728293031323435363738404041515354ככ5657585960bu616262656668File7273745<>Comet Garner - Apartme...template - Saved ✓Replacement AnalysisHomeTax rateWACCOld Equipment:Depreciation expense, Years 1 to 5Depreciation expense, Year 6Current book valueCurrent market valueMarket value. Year 6New Equipment:Estimated useful life (in years)Purchase priceSalvage value, Year 6Annual sales increaseAnnual reduction in operating expensesInitial increase in inventoriesInitial increase in accounts payableMACRS depreciation rates (5-year class):StepPurchase price of new equipmentSale of old equipmentTax on sale of old equipmentCalculation of investment at t = 0Change in net operating working capitalTotal investment outlayStep 2: Calculation of annual after-tax cash inflowsAnnual sales increaseAnnual reduction operating expensesAnnual increase in pre-tax revenuesAfter-tax annual revenue increaseStep 3: Calculation of annual depreciation tax savingsNew equipmentOld equipmentChange in annual depreciationAnnual dpreciation tax savingsFormulasNew equipmentOld equipmentChange i annual depreciationAnnual depreciation tax savingsStep 4: Calculation of net present value of replacementInitial investment outlayAnnual after-tax revenue increaseAnnual depreciation tax savingsWorking capital recoverySalvage value on new equipmentInsert DrawTax on salvage value of new equipmentOpportunity cost of old equpmentProject cash flowsNet present valueShould firm replace the old equipment?Workbook StatisticsCalibri (Body)B$650$325$3,575$4,150$800$14,000$1,400$2,000$1,400$2,900$700Year 120.00%640.00%15.00%-$14,000$4,150$2,000$1,400Year 1$650-$650Year 1#N/A$650-$650#N/AYear 0$0$0▼fxSheet1 +сYear 2Formulas#N/A#N/A#N/A#N/A#N/AYear 2Year 2#N/A#N/AYear 1Formulas#N/A#N/APage Layout32.00%$650-$650$650-$650$0$0NACA Member Portal$0DYear 319.20%Year 3$650-$650Year 3#N/A11$650-$650#N/AYear 2$0$0$0EYear 411.52%Year 4$650-$650Year 4#N/A$650-$650#N/AYear 3$0$0$0FBYear 511.52%Year 5Formulas$650-$650Year 5#N/A$650-$650#N/AYear 4$0$0$0GYear 65.76%Year 6$325-$325Year 6#N/A$325-$325#N/AYear 5$0$0$0HYear 6$0$0$1,400Assignments - you can a...Data ReviewFormulas#N/A#N/A#N/A#N/ASearch for tools, help, and more (Option + Q)JKViewL TMHelpabNO Tng.cengage.comMindTap - Cengage Lear...PGeneralQRST 1UTVvWExcel Online Student Work←0.00X.00→.0YZAAABACADC https://www.chegg.com/...AEAFSTNTAGAHAlAJAKEv APVALN Provider Portal - NCTracksEditing ✓AMTiANAOGive Feedback to Microsoft+APCommentsAQTARAS A40% + <>Comet Garner - Apartments in...FreasiaMy HomeCoursesVCatalog and Study ToolsRental OptionsCollege Success TipsCareer Success TipsRECOMMENDED FOR YOUStudy Tools? Help«Study Tools for IntroductoryCorporate FinanceGive FeedbackNACA Member PortalCENGAGE MINDTAPSubmitExcel Online Activity: Replacement AnalysisQuestion 10/10VideoXOpen spreadsheetAssignments - you can access...Should it replace the old steamer?The old steamerExcel Online Structured Activity: Replacement AnalysisThe Gilbert Instrument Corporation is considering replacing the wood steamer it currently uses to shape guitar sides. The steamer has 6 years of remaininglife. If kept, the steamer will have depreciation expenses of $650 for 5 years and $325 for the sixth year. Its current book value is $3,575, and it can besold on an Internet auction site for $4,150 at this time. If the old steamer is not replaced, it can be sold for $800 at the end of its useful life.$Gilbert is considering purchasing the Side Steamer 3000, a higher-end steamer, which costs $14,000, and has an estimated useful life of 6 years with anestimated salvage value of $1,400. This steamer falls into the MACRS 5-years class, so the applicable depreciation rates are 20.00%, 32.00%, 19.20%,11.52%, 11.52%, and 5.76%. The new steamer is faster and would allow for an output expansion, so sales would rise by $2,000 per year; even so, thenew machine's much greater efficiency would reduce operating expenses by $1,400 per year. To support the greater sales, the new machine would requirethat inventories increase by $2,900, but accounts payable would simultaneously increase by $700. Gilbert's marginal federal-plus-state tax rate is 40%,and its WACC is 15%.The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questionsbelow.Check My WorkBackng.cengage.com↑Mind Tap - Cengage Learningbe replaced.What is the NPV of the project? Do not round intermediate calculations. Round your answer to the nearest dollar.1XC https://www.chegg.com/homew...Reset ProblemN Provider Portal - NCTracksQ Search this courseAutosaved at 5:05 PM+NextXA-ZOfficeNA+

After tax salvage value of a fixed asset is calculated as shown below. The following points should be considered.While analyzing the new steamer, all incremental values should be considered.After tax salvage value of the old steamer, if sold now, is calculated as shown below. After tax salvage value of the old steamer, if sold in 6 years from now, is calculated as shown below. After tax salvage value of new steamer, if sold after six years, is calculated as shown below. Net working capital (NWC) required for new steamer is calculated as shown below. Based on the provided information, NPV for replacement project is calculated as shown below.NPV of the replacement project is $3,132.13. Being positive NPV, the replacement project should be accepted.Formulas used in the above table are shown below.NPV of the replacement project is $3,123. Being positive NPV, the replacement project should be accepted.