All the questions below are linked together (7 parts). I do not understand a few of them because steps like what formula was used was not told in the answer. Please explain step by step. Thank you.

Question:

Spend $100,000 on Machine C.You will need $5000 more in networking capital.C is three years MACRS.The cost of funds is 8%.Tax rate is 40%.C is expected to increase revenues by $45,000 and costs by $7,000 for each of the next 3 years.You think you can sell C for $10,000 at the end of the 3 year period.

(a) Find the year zero cash flow.

100000 purchase + 5,000 NWC = 105,000

(b) Find the depreciation for each year on the machine.

Using MACRS table,

100000*33.33%= 33,330

100000*44.45%= 44,450

100000*14.81%= 14,810

100000*7.41%= 7,410

(c)Find the depreciation tax shield for the 3 operating years.

33,300*40%= 13,320

44,450*40%= 17,780

14,810*40%= 5,924

(d) What is the projects contribution to operations each year, ignoring depreciation effects?

(sales-costs) * (1-t)

(45000-7000) * (1-0.4)

38000 * .6 = 22,800

(e) What is the total cash flow effect of selling the machine?

(sell price - book value) * (1-t) + book value

(10000-7410) * .60 + 7410

2590 * .60 + 7410

1554 + 7410 = 8964

***NOTE:BV IS THE UNDEPRECIATED PORTION

(f)Find the total CF for each year.

Yr 0= purchase of asset + NWC

100000 + 5000= 105000

Yr 1= (S- C) * (1-t) + D*t

(45000-7000) * .60 + 13332

22800 + 13332= 36132

Yr 2= 2280 + 17780= 40580

Yr 3= [(S- C) * (1-t) + D*t] + [(sell price + BV) * (1-t) + BV] + NWC

[22800 + 5924] + [(10000- 7410) * .60 + 7410] + 5000

28724 + [2590 * .60 + 7410] + 5000

28724 + 8964 + 5000 = 42688

***NOTE:ON YR 3, YOU USE THE SAME FORMULA AS YOU DID ON THE FIRST 2 YRS.BUT SINCE IT'S THE LAST YR & THEY SOLD OFF THEIR ASSETS & GET TO RECOVER NWC, THOSE THINGS ARE ADDED BACK.

(g)Should you buy it?

NPV= CF (1+r)^t

36132/(1.08)^1= 33455.56

40580/(1.08)^2= 34790.81

33887/(1.08)^3= 33887.11

33455.56 + 34790.81 + 33887.11 = 102133.48 - 105000 = -2866.52

NPV= -2866.52,

No.You should not buy it.