Consider the following financial information about a new machine a company is planning to buy:

• The machine costs $250,000 and will be used for 4 years.
• The machine will be depreciated using MACRS 7-year class property.
• At the end of the project life, the machine will be sold at $102,000.
• The firm will invest $69,000 in working capital (fully recoverable at the end of the project life).
• The expected revenues are $150,000 in year 1, and they increase $20,000 every year thereafter (i.e., every year the revenues are $20,000 more than in the previous year).
• Operating and maintenance costs are $50,000 annually.
• The firm will ask for a loan to finance 30% of the machine cost at an interest rate of 8%. The firm is required to repay the loan with 4 equal annual payments.
• The firms tax rate is 40%.
• The firms MARR is 10%.

With the above information, compute the present worth for this project. Is this a good investment? Why? Explain your answer clearly.

Show all your calculations and explain every step. Always use factor notation.

Complete the income and cash flow statements

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Income Statement 0 1 2 3 4 Revenues Expenses O&M Depreciation Debt Interest Taxable income Income Taxes Net Income Cash Flow Statement 0 1 2 3 4 Operating Activities Net Income Depreciation Investment Activities Investment Salvage Value Gains Tax Working capital Financing Activities Borrowed Funds Principal Payment Net Cash Flow