Broke Motors Inc. is considering the purchase of a new industrial electric motor to replace the motor currently in use. Management has provided you with the following comparative data: Old Motor New Motor Purchase cost of the motor - $162,000 Current book value $36,000 - Current disposal value 50,000 - Terminal disposal value 3 years from now - 0 Working capital required 25,000 36,000 Additional data: The income tax rate is 20%. Working capital is fully recoverable at the end of the useful life. The useful life of new equipment is 3 years, and the remaining life of old equipment is also 3 years. Straight line depreciation method is used. (Assume that salvage value is zero for depreciation purposes). The before tax additional operating cash inflows from the new equipment are: $110,000 in year 1; $145,000 in year 2; and $120,000 in year 3. 1. Calculate the initial investment and the annual cash flows if Broke Motoros decides to replace the old motor using the below cash flow sketch (table). Items Time 0 Year 1 Year 2 Year 3 2. If Broke Motors Inc. is willing to recover its initial investment in no more than 2 years. replace the old motor using the below Items Time 0 Year 1 Year 2 Year 3