The M&M Manufacturing Company is considering the purchase of a new machine. The

cost of the new machine is $ 250,000, the installation cost is $25,000 and the

transportation and the insurance costs are $ 25,000. The machine will be depreciated by

the MACRS's five

-year recovery method. The economic life of the machine is five years

and the M&M Company can sell it at the end of the fifth year at $ 50,000. The tax rate is

40%. The company's weighted average cost of capital is 9%. The production manager

estimated the initial Net Operating Working Capital at year zero to be $ 40,000 and will be

increased by $ 15,000 at the end of the third year and reduced by $ 4000 in year five. The

stock of the Net Operating Working Capital will be recovered at the end of year five. If the

forecasted earnings before interest, taxes, depreciation and amortization (EBITDA) are as

follows: