HK Anysis NEW PROJECT ANALYSIS You must evaluate a proposal to buy a new milling machine. The base price is $189,000, and shipping and installation couts would add another $10,000. The machine Pulls into the MACHS Sear daws, and would be sold after 3 years for sas,050. The applicable depreciation rates are 33%, 45%, 15%, and 7%. The machine would require a $4,000 increase in net operating noong capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax tabor costs would decine by $36,000 per year. The marginaltitel 35 and the WACC is 10%. Also, the firm spent $5,000 last year investigating the feasibility of using the machine a. How should the $5,000 spent last year behandled? 1. Last year's expenditore is conuidered as a wink cost and does not represent an incremental cash flow. Hence, it should not be induced in the analysis. II. The cost of research is an incremental cash flow and should be induded in the analysis It Only the tax effect of the research expenses should be included in the analysis IV. Last year's expenditure should be treated as a terminal canh low and cult wah the end of the projects We Hence, it should not be tochuded in the intent outlay lint ear's expenditure acondered as an opportunity cost and does not present an incremental chw. Hence, it should not be called the b. What is the initial investment outay for the machine for Capital budgeting purposes, that, what is the Year O project cash flow Mound your wwwer to the nearest cent What we the project's annual cash flow during Years 1, 2 and 3? found your newer to the west cent. Do not found your intermediate calculations Year 15 Year 25 Years d. Should the machine be purchased? -Select