PLEASE answer A-D by 10:50 AM. THANK YOU!

You must evaluate a proposal to buy a new milling machine. The purchase price of the milling machine, including shipping and installation costs, is $138,000, and the equipment will be fully depreciated at the time of purchase. The machine would be sold after 3 years for $54,000. The machine would require an $8,000 increase in net operating working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $32,000 per year. The marginal tax rate is 25%, and the WACC is 8%. Also, the firm spent $4,500 last year investigating the feasibility of using the machine.

A. How should the $4,500 spent last year be handled?

I. Last year's expenditure is considered a sunk cost and does not represent an incremental cash flow. Hence, it should not be included in the analysis.

II. The cost of research is an incremental cash flow and should be included in the analysis.

III, 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 cash flow and dealt with at the end of the project's life. Hence, it should not be included in the initial investment outlay.

V. Last year's expenditure is considered an opportunity cost and does not represent an incremental cash flow. Hence, it should not be included in the analysis.

B. What is the initial investment outlay for the machine for capital budgeting purposes after the 100% bonus depreciation is considered, that is, what is the Year 0 project cash flow? Enter your answer as a positive value. Round your answer to the nearest dollar. $

C. What are the project's annual cash flows during Years 1, 2, and 3? Do not round intermediate calculations. Round your answers to the nearest dollar. Year 1: $ Year 2: $ Year 3: $

D. Should the machine be purchased?

he time of purchase. The machine would be sold ahee 3 vears for 594,000 . the machine wouls roquare an 38,000 increast in net coerating working capital (insressed inventory less inareased aceounts ayable) There would be no effect on revenues, but pretax iaber couts would deche by 532,000 per yeac. The marginat tax rate is 25%, and the wacc is 8%. Aso, the firm spent $4,500 last year trestigating the feasbiliy of using the machine. How should the $4,500 spent last year be handiec? L. Last year's expenditure is considered a suak cont and does not represent an incremental cash fow. Hence, it should not be incluced h the analysis. II. The cost of research is an incremental cash fow and should be included in the analysis IIt. Only the tax effect of the retearch expenses sheuld be incloded in the analyis. IN. Last year's expendture thould be trebted as a terminal cash fow and dealt wht ot the end ef the project's life. Hence, it should not be included in the inital thvestment outtay. V. Last year's expendhure is considered an epportunity ceet and boes not represent an incremental cath fow. Mince, it should not be induded in the analyas. b. What is the initsol investment outiay for the machine for capital budgebing purposes aher the loow bonve depctoation is censidered, that is, what is the Year 0 project cash how? Enter your answer as a cositive value. Round your arower to the nearest doliar c. What are the project's annual cash flows during Years 1, 2, and 32 Do not round intermediate cakculabions. Round your answers to the neerest dollar. Year 1: 5 Year 2:5 Year 3:5 4. Should the machine be purchasod