As a fresh college graduate, you have been asked by the CFO of your company to evaluate the proposed COVID-19 Vaccination mobile equipment for the company's R&D department. The equipment's basic price is $72,000, and it would cost another $18,000 to modify it for special use by your firm. The mobile equipment, which falls into the MACRS 3-year class, would be sold after 3 years for $40,000. Use of the equipment would require an increase in net working capital (spare parts inventory) of $5,000. The mobile equipment would have no effect on revenues, but it is expected to save the firm $30,000 per year in before-tax operating costs, mainly labor. The firm's marginal federal-plus-state tax rate is 40%.

a. What is the net cost of the mobile equipment? (That is, what is the Year-0 net cash flow?)

b. What are the net operating cash flows in Years 1, 2, and 3?

c. What is the additional (nonoperating) cash flow in Year 3?

d. If the project's cost of capital is 10%, should the mobile equipment be purchased?