The Siclan Company is considering opening a new office. The company owns the building and would sell it for $74,000 after taxes if it does not open the new office. The building has been depreciated down to a zero book value. The equipment that would be used in the building costs $69,000. The equipment that would be used has a three-year tax life, depreciated straight-line, with zero scrap value. (If the company tried to sell the equipment at the end of Year 3, it would receive zero sales proceeds). (There will be no new revenues after the end of Year 3.) No new working capital is required.

Cost of Capital = 15%

Due to opening the office and using the equipment,

additional annual revenues = $100,000 Additional annual operating cost, excluding depreciation = $20,000 Tax rate = 30%

a. What is the required cash outflow associated with the acquisition of a new machine at t = 0?

b. What is the projects NPV?

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