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You must evaluate a proposal to buy a new milling machine. The purchase price of the milling machine, including shipping and installation costs, is $112,000, and the equipment will be fully depreciated at the time of purchase. The machine would be sold after 3 years for $71,000. The machine would require an $8,500 increase in net operating working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $57,000 per year. The marginal tax rate is 25%, and the WACC is 10%. Also, the firm spent $4,500 last year investigating the feasibility of using the machine. a. How should the $4,500 spent last year be handled? I. Last year's expenditure is considered an opportunity cost and does not represent an incremental cash flow. Hence, it should not be included in the analysis. II. Last year's expenditure is considered a sunk cost and does not represent an incremental cash flow. Hence, it should not be included in the analysis. III. The cost of research is an incremental cash flow and should be included in the analysis. IV. Only the tax effect of the research expenses should be included in the analysis. V. Last year's expenditure should be treated as a terminal cash flow and dealt with at the end of the project's life. Hence, it should not be included in the initia investment outlay. b. What is the initial investment outlay for the machine for capital budgeting purposes after the 100% bonus depreciation is considered, that is, what is the Year 0 proiect cash flow? Enter your answer as a positive value. Round your answer to the nearest dollar. $ c. What are the project's annual cash flows during Years 1, 2, and 3? Do not round intermediate calculations. Round your answers to the nearest dollar. Year 1: \$ Year 2: \$ Year 3: \$ d. Should the machine be purchased? 'ou must evaluate the purchase of a proposed spectrometer for the R\&D department. The purchase price of the spectrometer including modifications is $300,000, and the quipment will be fully depreciated at the time of purchase. The equipment would be sold after 3 years for $85,000. The equipment would require an $11,000 increase in net perating working capital (spare parts inventory). The project would have no effect on revenues, but it should save the firm $54,000 per year in before-tax labor costs. The irm's marginal federal-plus-state tax rate is 25%. a. What is the initial investment outlay for the spectrometer after bonus depreciation is considered, that is, what is the Year 0 project cash flow? Enter your answer as positive value. Round your answer to the nearest dollar. $ b. What are the project's annual cash flows in Years 1, 2, and 3? Do not round intermediate calculations. Round your answers to the nearest dollar. Year 1: \$ Year 2: \$ Year 3: \$ c. If the WACC.is 12%, should the spectrometer be purchased? -Select- Yes No The Lesseig Company has an opportunity to invest in one of two mutually exclusive machines that will produce a product the company will need for the next 8 years. Machine A has an after-tax cost of $9.7 million but will provide after-tax inflows of $4.6 million per year for 4 years. If Machine A were replaced, its after-tax cost would be $11 million due to inflation and its after-tax cash inflows would increase to $4.9 million due to production efficiencies. Machine B has an after-tax cost of $14.8 million and will provide after-tax inflows of $3.6 million per year for 8 years. If the WACC is 15%, which machine should be acquired? Explain. Enter your answers in millions. For example, an answer of $10,550,000 should be entered as 10.55 . Do not round intermediate calculations. Round your answers to two decimal places. Machine is the better project and will increase the company's value by $ millions, rather than the $ millions created by Machine