1. (Identifying cash flows) An analyst has prepared the following data as part of a proposal to acquire a new machine:

cost to purchase machine $40,000

cost to install machine 1,000

cost of new electric wiring 2,000

first year depreciation of machine 4,000

sales tax on purchasing machine 3,000

economic salvage value of the machine 10,000

accounting salvage value of the machine 8,000

a. Which of the above figures should enter the capital budgeting analysis?

b. What figure should enter the capital budgeting analysis as the investment at year zero?

c. Which of the above figures should not enter the capital budgeting analysis?

d. Will any of the items you list in part c have a later impact on the firms cash flows? If so, what?