Synlex Inc. is considering the purchase of a new machine for$600,000. It would cost$4,000to install the machine. It would necessitate an increase of net working capital120,000at the initial time. It will result in an increase of sales revenue by$210,000and an increase of maintenance cost by$40,000per year. The machine has an expected life of10years, after which it will have salvage value of$50,000. Assumestraight-line depreciationand the machine is being depreciated down tozero. The marginal tax rate is40%and the required rate of return is10%.

Required

a. Calculate the machine'sinitial investment.

b. Calculate theoperating cash flowsover the machine's life.

c. Is itfavorablefor Synlex Inc. to purchase the machine?

(PVIFA 10%, 10 =6.1446; PVIFA 10%, 9=5.7590; PVIF 10%, 10 = 0.3855)

d. Whatother elementsshould Synlex consider in deciding whether to make this investment?