Click here to read the booki Analysis of an Expansion Project NEW PROJECT ANALYSIS You must evaluate a proposal to buy a new milling machine. The base price is $160,000, and shipping and installation costs would add another $6.000. The machine falls into the MACRS 5-year class, and it would be sold after 3 years for $14,000. The applicable depreciation rates are 334,45%, 15% and 7%. The machine would require a $7.000 increase in not operating working capital increased ventory les increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $42.000 per year. The marginal tax rate is 354, and the WACC is 13%. Also, the firm spent $5.000 last year investigating the feasibility of using the machine a. How should the $5,000 spent last year be handled? 1. Last year's expenditure should be treated as a terminal cash flow and dealt with at the end of the project's life. Hence, should not be included in the initial investment outley II. Last year's expenditure is considered as an opportunity cost and does not represent an incremental cash flow. Hence, it should not be included in the analysis. III. Last year's expenditure is considered as a sunk cost and does not represent an incremental cash flow. Hence, it should not be included in the analysis. IV. The cost of research is an incremental cash flow and should be included in the analysis Only the tax effect of the research expenses should be included in the analysis b. What is the initial investment outlay for the machine for capital budgeting purposes Year project cash flow Round your answer to the nearest cest con cent. Do not round your intermediate calculation c. What are the project's annual cash flows during Years 1. 2. and Round your ar Year 15 Year 25 Years d. Should the machine be purchased