3. (Identifying incremental cash flows) An analyst has prepared the following data as part of a proposal for an addition to the firm's plant: Cost to build addition $ 500,000 Book value of existing plant 7,000,000 Cost for new machinery 200,000 Cost of new electric wiring 30,000 Amount spent on study to date 2,000 Increase to working capital to support machinery 60,000 Interest on loan to finance the addition 40,000 a. Which of the above figures should enter the capital budgeting analysis? Why? b. Which of the above figures should not enter the capital budgeting analysis? Why? c. Suppose that $15,000 of verking capital currently in use elsewhere within the company could per- form double duty by supporting this facility as well. How would this change your answers to parts a and b? d. Suppose the land under the plant would have been sold to a real estate developer for $1,500,000 if the addition were not built. How would this change your answers to parts a and b? 7. 3. (Identifying incremental cash flows) An analyst has prepared the following data as part of a proposal for an addition to the firm's plant: Cost to build addition $ 500,000 Book value of existing plant 7,000,000 Cost for new machinery 200,000 Cost of new electric wiring 30,000 Amount spent on study to date 2,000 Increase to working capital to support machinery 60,000 Interest on loan to finance the addition 40,000 a. Which of the above figures should enter the capital budgeting analysis? Why? b. Which of the above figures should not enter the capital budgeting analysis? Why? c. Suppose that $15,000 of verking capital currently in use elsewhere within the company could per- form double duty by supporting this facility as well. How would this change your answers to parts a and b? d. Suppose the land under the plant would have been sold to a real estate developer for $1,500,000 if the addition were not built. How would this change your answers to parts a and b? 7