El Gato's Motors is considering the purchase of a new production machine for $1 million. Although the purchase of this machine will not produce any increase in sales revenues, it will result in a before-tax reduction of labor costs by $400,000 per year. To operate this machine properly, workers would have to go through a brief training session that would cost $100,000 after tax. In addition, it would cost $50,000 after tax to install this machine properly. Also, because this machine is extremely efficient, its purchase would necessitate an increase in inventory of $150,000 and a decrease in account payables of $$90,000. This machine has an expected life of 10 years, after which it will have salvage value of $120,000. Assume simplified straight-line depreciation and that this machine is being depreciated down to zero, a 34 percent marginal tax rate, and a required rate of return of 12 percent. SHOW ALL WORK

1. What is the initial outlay associated with this project?
2. What are the operating cash flows associated with this project?
3. What is the terminal cash flow in year 10?
4. Should this machine be purchased?