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Please help with this question especially e) and g). Thanks! all of the data is in the picture. Problem 2 Specter Ind. is considering a

Please help with this question especially e) and g). Thanks! image text in transcribed
all of the data is in the picture.
Problem 2 Specter Ind. is considering a new project involving the acquisition of a new machine that would replace an older machine currently in use. The new machine costs $650,000 (at t=0 ) and can be sold at the end of its expected 4-year operating life for $380,000( at t=4). The old machine was bought 5 years ago for $500,000 and can be sold for $220,000 today or for $120,000 in 4 years. Both, the old and the new machine belong to asset class 43 with a CCA rate of 30%. The vendor will charge $50,000 for the installation of the new machine and the removal of the old machine, and this amount must be capitalized and added to the class 43CCA pool. Management believes that the company will have other class 43 assets in four years when the equipment is sold. The Accelerated Investment Incentive rule applies. The cost of operating the old machine is expected to be $150,000 next year (at t=1 ) with this cost increasing at 4% per year over the next three years (att=2,,4). Management paid $50,000 for a study that estimates that the cost of operating the new machine will be $50,000 in its first year of operation (at t=1 ) and will inerease over the next three years at the same rate as the old machine. Since the new machine is more reliable, the plant will need to keep fewer spare parts in stock. Management expects that inventory levels can be reduced by $80,000(at=0) when the new machine is installed (note, at the end of the project, this change in net working capital will be reversed, i.e., inventory levels will increase again by $80,000 at t=4 ). Specter's marginal tax rate is 30%, and its required rate of return (RRR) is 10%. a) What is the initial cash outlay (the total cash flow at t=0) ? b) What is the first year's cash flow (at t=1; excluding the CCA Tax Shield)? c) What is the last year's cash flow (at t=4; excluding the CCA Tax Shield)? d) What is the year 1CCA ? e) What is the year 3CCA ? f) What is the PV of CCA Tax Shields? g) What is the NPV of the project

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