Question 2 (16 marks) A proposed new project needs a new machine that costs $61,000 and has an estimated salvage value of $40,000 at the end of the project. The project lasts for four years but is required to use the seven-year MACRs for tax purpose. The project has projected annual sales of $108,000 and annual operating costs of $51,000. The required initial net working capital investment is $15,000, the corporate tax rate is 35%, and the project discount rate is 12 percent. Year 3-year MACRS7-year MACRS 33.33percent 4.49 17.49 2.49 8.93 8.92 8.93 4.46 14.29 44.45 14.81 7.41 a. Compute the predicted operating cash flows over the project life using the tax shield approach. Show b. What is the predicted net capital spending starting from year 0 to year 4? Show your calculation. (6 c. What is the cash flow from asset (CFFA) starting from year 0 to year 4? Show your calculation. (4 d. Suppose the company decides to make this investment today. Four years later, the company is your calculation. (4 marks) marks) marks) considering another new project, which can make use of the machine that was bought in the old project Should the original cost of the old machine $61,000 be considered as the cost of investment for the new project? Should the salvage value of the old machine at that time be considered as the cost of investment for the new project? (2 mark)