Hurricanes Company (HC) wants to purchase a new machine costing $500,000 which will last 12 years to make Helmet S200 - a new product. Because HC deals in products that are consumer oriented where tastes change rapidly, they assume a useful life for their products of 5 years. This machine could be sold for $200,000 at the end of Year 5 or for $50,000 at the end of 12 years. . Hurricanes will have to increase its inventory and accounts receivable by $150,000 at the beginning of year 1 and by an additional $50,000 at the beginning of Year 2. They can recover only $150,000 of this working capital investment at the end of Year 5. . Assume all of the following cash inflows occur at the end of the year. . The new product revenues are expected to be as follows: Year 1 $400,000 Year 2 $500,000 Year 3 $700,000 Year 4 $700,000 Year 5 $300,000 . Cash outflows for the production of the Helmet S200 will be 50% of revenues in Years 1, 2, and 3 and 60% of revenues in Years 4 and 5. . HC will spend $100,000 on an advertising campaign in Year 1 An additional $20,000 will be spent on advertising each year for years 2-5 (treat as an annuity) . As part of the decision whether to make the Helmet S200, HC spent $100,000 on a preliminary market study last year. The machine will be in a CCA class where the rate is 20% . Taxes are 40% and Hurricanes requires 10% rate of return.REQUIRED: Should Hurricanes Company purchase this new machine? Include a calculation of the net present value (17 marks), margin of safety and discounted payback (6 marks). Also include qualitative points that should be considered (2 marks). Show all calculations. Formulas: CCA Tax Shield Cdt X 1+.5 k 1+k WWW Lost Tax Shield (Salvage) sdt X PVIF (k%, n years)