The TDK Corp. is considering replacing an old machine. You are given the following information for analysis:

Existing Situation:

Salary and benefits for one full time operator - $39,000

Cost of Maintenance - $5,000 per year

Cost of Defects - $9,000 per year

Original Cost of Old Machine - $145,000

Annual Depreciation - $14,500 per year

Current Salvage Value - $69,000

Current Age of Machine - 4 years

Proposed Situation:

Cost of New Machine - $169,000

Installation and Shipping Fees - $25,000

Cost of Maintenance - $7,000 per year

Cost of Defects - $3,000 per year

Expected Life - 6 years

Salvage Value at end of Machine's Life - $38,000

Depreciation Method - Straight Line

Also the new machine will require TDK to increase their inventory level (current assets) by $90,000 and also increase their current liabilities by $60,000. Prior to purchasing a new machine, TDK paid a marketing consultant $7,000 to determine the potential for new market share associated with replacing the old machine with a new machine with greater production capacities. It should also be noted that a local merchant paid $8,500 per year to use TDK's old machine during after hours for the production of their product. The merchant indicates that the new machine will not be suitable for her production process and therefore will discontinue the lease payment. Assuming TDK is in the 21% marginal tax bracket, calculate the initial investment and yearly cash flows associated with the new machine. (Label all of your cashflow estimates) (18 points)