Capital Budgeting 3 Homework ( 64 points) Your firm is thinking about investing in a new machine. Use the information below to find the machine's net cash outlay. 1. Yeart 245,000 Cost of New Asset Old Asset Book Value Proceeds on Sale Initial Purchase Price Capital Gains Tax Rate Ordinary Income Tax Rate Decrease in Working Capital 0 110,000 100,000 15.00% 30.00% 24,000 2. If your firm buys the machine, it will have a useful life of three years. Use this and the information below to find the firm's marginal operating cash flows. Yeart Yeart+3 10.00% Revenues Revenue Growth Rate Expenses Expense Inflation Rate Installed Cost of New Asset Tax Rate Operating Cash Flows, Old Asset Yeart+1 Yeart+2 234,500 10.00% 56,780 9.00% 245,000 30.00% 101,000 101,000 9.00% 101,000 3. At the end of Yeart+3, the asset you purchased in Yeart will be sold for $76,540. Find the firm's terminal cash flow. The firm's cost of capital is 15%. Find the IRR for this machine and determine whether your firm should invest in it or not. Justify your answer. 4