5. The details of a 4-year investment proposal to replace an old machine are as follows: Capital cost of a new 4-year machine = $10,000 Salvage value of new machine in year 4 =$1,000 Current salvage value of old machine = $1,000 Current book value of old machine = $0 Extra initial inventory =$3,000 will be fully recovered when the project is finished Existing warehouse building to install the new machine can be sold for $2,000 after-tax today and is worthless in four years' time OC R&D=$2000 spent in the previous year Increase in before-tax revenue = $5,000 p.a. Increase in before-tax operating costs = $1,000 p.a. Allocated overhead - $800 of the existing overhead expensex Annual depreciation of new machine on straight-line prime cost basis = $2,500 Tax rate = 40% What should be the Capital Cash Flow in year 4? (a) $600 (b) $1,000 $3,000 W $3,600 $4,000