Students should use that information to assess the following capital investment: Superior Machining, Inc., a mid-size machining company, is considering an expansion of its product line. In order to do so, it must install new equipment at an expected cost of $2 million. Management is looking to fund the entire investment with equity, the providers of which expect a 14% return. Based on its experience with prior investments of the same type, management has developed the following estimates: Year Equipment Tax Operating Purchase Revenue Cost Depreciation 0 $2,000,000 1 $300,000 $200,000 14.3% 2 $600,000 $200,000 24.5% 3 $750,000 $200,000 17.5% 4 $750,000 $200,000 12.5% 5 $750,000 $200,000 8.9% 6 $750,000 $200,000 8.9% 7 $750,000 $200,000 8.9% 8 $750,000 $200,000 4.5% 9 $750,000 $200,000 10 $750,000 $200,000 WN The combined federal and state income tax rate for Superior is 26%. Note: Tax Depreciation is a non-cash charge, meaning that it can be deducted as expense when computing taxable income even though it does not represent an actual cash outlay