Taylors Holdings is considering investing in anew industrial binding machine. This newmachinehas an estimated life of three years. The cost of the new machine is $45,000 and the machine will be depreciated straight line over its 3-year life to a residual value of $0. The new binding machine will result in sales of 2,000 books in the first year. Sales are estimated to grow by 10% for year 2 but there is an estimated decline of 5% for year 3. The price per book that Taylors Holdings will charge its customers is $15 each and is to remain constant. The book has a costper unit to bind of$7 each. Jt is estimated that Taylors Holdings needs to hold 2% of its annual sales in cash, 4% of its annual sales in accounts receivable, 9% ofits annual sales in inventory, and 5% of its annual sales in accounts payable. The firm is in the 40% tax bracket and has a cost of capital of 10%.

(c) Suppose that approximately of the new binding machine's sales come from customers who would have purchased books from an existing alternative binding solution offered by the firm, if the new binding machine were not available. The existing solution wholesales for $10 per book and cost of $5 per book. Recalculate the Unlevered Net Income for Year I to Year 3 for Taylors Holdings.