(Q 1, 2, 3, 4) Company M is considering adding a robotic paint sprayer to its production line. The sprayers base price is $1,080,000 and it would cost another $22,500 to install it. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $605,000. The MACRS rates for the first 3 years are 0.3333, 0.4445, and 0.1481. The machine would require an increase in net working capital (inventory) of $15,500. The sprayer would not change revenues, but it is expected to save the firm $380,000 per year in before-tax operating costs, mainly labor. Company Ms marginal tax rate is 35%. Hint that wont be on the exam: The pre-tax cost savings can be seen as a revenue. See excel sheet for guidance on solving this problem. 1. What is the year-0 cash flow? 2. What are the cash flows in years 1, 2, and 3? Do not include recovery of NWC or after-tax salvage value in year 3s calculation here. 3. What is the additional cash flow in year 3 from NWC and after-tax salvage value? 4. If the projects cost of capital is 12%, what is the NPV? Should the machine be purchased?