The president of the company you work for has asked you to evaluate the proposed acquisition of a new chromatograph for the firm's R&D department. The equipment's basic price is $93,735, and it would cost another $10,415 to modify it for special use by your firm. The chromatograph, which falls into the MACRS 3-year class, would be sold after 3 years for $37,494. The MACRS rates for the first three years are 0.3333, 0.4445, and 0.1481. Use of the equipment would require an increase in net working capital (spare parts inventory) of $5,512. The machine would have no effect on revenues, but it is expected to save the firm $40,526 per year in before-tax operating costs, mainly labor. The firm's marginal federal-plus-state tax rate is 21.0% and its cost of capital is 14.0%. How much is the initial outlay (year zero net cash flow) for this project?

1. ($99,002)
2. ($97,153)
3. ($106,745)
4. ($135,196)
5. ($109,662)