5. You must evaluate a proposal to buy a new milling machine. The base price is $108,000, and shipping and installation costs would add another $12,500. The machine will be straight line depreciated and it would be sold after 3 years for $65,000. The machine would require a $5,500 increase in net operating working capital (increased inventory less increased accounts payable). Revenues from the new machine will be $50,000 The marginal tax rate is 35%, and the WACC is 12%.

A. What this the FCF for year 0 3 (Hint: Year 0 is the cost of the equipment, Years 1-3 is the operating of the machine).

B. Compute the profitability using MIRR, would you accept this project?