PLEASE SHOW WORK. THANK YOU

Homework for Finance 3309 Capital Budgeting - Part 1 Due: Wednesday, November 28 by 9 AM -Upload an original or scanned document to Canvas FOR FULL CREDIT, PLEASE show your work in a professional manner for credit (Label cash flows, use S signs, and the like). You should show your cash flows using the steps and approach used by me in class. 1. (20 pts) Tremont Designs is considering replacing one of its machines. The current equipment was purchased 5 years ago, and its installed cost was $225,000. At that time it was estimated to have a useful life of 10 years. The machine is being depreciated using the simplified straight-line method and its market value today is $10,000. Six full-time machine operators are required to operate the machine. Each is paid a $40,000 annual salary. The existing machine creates about $20,000 worth of defects per year, and costs $5,000 per year to maintain The proposed machine costs $390,000, requires the company to spend $30,000 for shipping and installation If purchased, it will be depreciated to a zero book balance using straight line depreciation over its 5-year expected useful life. Though the firm does not expect revenues to increase with the new machine, the newer model is more efficient and less labor intensive. As a result only three machine operators are required, the cost of defects would drop to $8,000 per year, and maintenance would now reach $12,000 annually. Greern expects to the proposed new machine to have a $64,000 market value at the end this time. The firm's total marginal tax rate-both state and federal-is 21%, with relation to the cash flows associated with this replacement, what is/are the: a. Initial outlay associated with this project? b. Annual after-tax cash flows associated with this project (ocFs), for years 1 through 4? c. Total Terminal year cash flow in year 5