Nuts & Bolts considers the purchase of a new machine at a cost of $1,070,000 at the end of

the current year (year 0). The expected lifetime is 5 years. In addition, at the end of year 3, a

major upgrade ($80,000) will be necessary to stay competitive (ATO depreciation schedule

calls for 5 years as well).

Over this period, the machine will be responsible for $500,000 additional sales per year and

$150,000 in additional COGS. The corporate tax rate is flat at 30%.

As part of day-to-day operations, it is expected that A/R increase by $30,000 in year 1and

another $40,000 in year 4. Inventory will increase by $20,000 in year 1 and another $10,000

in year 4. A/P will increase by $25,000 and $15,000, respectively.

At the end of year 5, there are decommissioning costs of $50,000. The machine is assumed to

be sold for $138,000. Working capital changes are assumed to be reversible at the end of the

project without loss.

Compute the new machines incremental cash flows for year 0 through year 5