Questions The Boomerang Company is evaluating the proposed acquisition of a new milling machine. The machine's base price is $23,000. The machine will be depreciated straight-line to zero for over its 4 years tax life and afterwards it will be worthless. Use of the new machine requires an increase in net working capital. According to the predictions, net working capital need is 8% of capital outlay and this will increase by 5% per year. It is expected that the project will generate a Net Sales of $58,900 in year one and it will increase by 5% in following years. Operating cost is expected 60% of Net Sales. Boomerang's marginal tax rate is 0.40 and WACC is 0.15. 0 1 2 3 4 SALES REVENUE (Operating cost) (Depreciation) EBIT Tax NOPAT +Depreciation Operating Cash Flows AFA NWC ANWC FREE CASH FLOWS