4.The machinery has a remaining economic life of four years, and the company has obtained a special tax ruling that allows it to depreciate the equipment under the MACRS 3-year class. Under current tax law, the depreciation allowances are 0.33, 0.45, 0.15, and 0.07 in Years 1 through 4, respectively. The machinery is expected to have a salvage value of $100,000 after four years of use

a.What is Indian Rivers Year 0 net investment outlay on this project?

b.What is the expected non-operating cash flow when the project is terminated at Year 4?

TABLE 1 Project Cash Flow Estimates Depreciation Schedule: Basis = x Net Investment Outlay: Price Freight Installation Change in NWC X X X X X Year 1 2 3 MACRS Factor 33% x 7 100% Deprec. Expense $188,100 X X 39.900 End-of-Year Book Value $381,900 X X 0 4 Year 2 Year 3 Year 1 $ 2 425,000 $850,000 637,500 188.100 20.000 X X X X X X X X X Year 4 $ 2 425,000 $850,000 637,500 39,900 20.000 X X X $ 4,400 X X $152,600 Cash Flow Statements: Year 0 Unit price Unit sales Revenues Operating costs Depreciation Other project effects Before tax income Taxes Net income Plus depreciation Net op cash flow Salvage value SV tax Recovery of NWC Termination CF Project NCF X X 1.760 $ 2,640 188.100 $190,740 > XIX X 61.040 $91,560 39.900 $131,460 $100,000 X X -X X X