2. (13 marks) Your company is considering investing in a new machine. The cost of the machine is $100,000 and the machine is to be depreciated over five years to a residual value of $0. The new machine will produce 3,000 units, which at $20 each, increases sales by $60,000 per year. The cost per unit is $10 each. At the end of two years, production will cease and you expect to be able to sell the machine for $60,000. It is estimated that the firm needs to hold net working capital equal to 5% of total sales. The firm is in the 30% tax bracket and the opportunity cost of capital is 7%. i. Calculate the annual Free Cash Flows for the new machine. (10 marks) ii. Should you invest in the new machine? Briefly explain