new machine costs$9,000 and is expected to have no salvage value on retirement. The machine will be depreciated for tax purposes in three years by the sum-of-the-years'-digits method. It is expected to generate an annual revenue of $20,000 for the next three years and to require an annual operating cost of $4,500 (excluding the depreciation of the machine). The tax rate is 40 percent.

(a) Compute the net cash flows of each year.

(b) How would the net cash flow of each year be changed if the firm used the double declining-balance method?