A large store is deciding whether to install a machine in each of its store. Each machine costs $250,000. Projected income per machine is as follows:

Year

1

2

3

4

5

Sales

200,000

300,000

300,000

250,000

250,000

Operating Expenses

200,000

200,000

200,000

200,000

200,000

Depreciation

50,000

50,000

50,000

50,000

50,000

Accounting Income

0

50,000

50,000

0

0

Why would the store continue to operate a machine in Years 4 and 5 if it produces no profits? What are the cash flows from investing in a machine? Assume each machine is completely depreciated and has no salvage value at the end of its 5 years life. Show all your workings and justify your answer.