Test 3 Use the following information to answer Questions 51-61. Milton Industries is considering the purchase of additional equipment to expand it production capacity. The equipment it is considering has a quoted price of $1,100,000. Milton estimates that an additional cost of $95,000 will be incurred to have the equipment modified, shipped, and installed. The purchase of this additional equipment will require Milton to invest an estimated $55,000 in net working capital upfront, and this investment should be recovered when Milton sells the equipment. If purchased, the equipment will be employed for a total of five years, and then sold for an estimated $690,000. Even though the equipment will be employed for five years, it will be depreciated straight-line on an eight-year schedule. During each of the years that the equipment is in service, it is expected to boost Milton's sales revenue by $340,000 though annual operating costs (other than depreciation) are also expected to be higher, to the extent of $74,000. Milton faces a marginal tax rate of 40%, and its cost of capital is 7.25%. 60. The present value of the expected future cash flows from the project is about: A. $1.189 million B. $1.192 million C. $1.362 million D. $1.350 million E. $1.303 million 61. Milton Industries should: 4. Accept the project because the internal rate of return is greater than 0% B. Accept the project because the net present value is greater than $0 C. Accept the project because the net present value is greater than the IRR D. Accept the project because the IRR is greater than the net present value (E.) Accept the project because the net present value is greater than 7.25%