$$4,500$ last year investigating the feasibility of using the machine.

a$.$ How should the $$4,500$ spent last year be handled?

I. The cost of research is an incremental cash flow and should be included in the analysis.

II$.$ Only the tax effect of the research expenses should be included in the analysis.

III. 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 initial investment outlay.

IV$.$ 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.

V$.$ 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.

$-$Select$-$V

$

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?