The XYZ Company is evaluating the acquisition of new equipment. The equipments base price is $150,000, and it would cost another $16,000 to modify it for special use by the firm. The equipment falls into the MACRS 3-year class (33% depreciation in year 1, 45% in year 2, 15% in year 3, and 7% in year 4), and it would be sold after 3 years for $75,000. The equipment will require an increase in net working capital of $7,500. The equipment will have no effect on revenues, but it is expected to save the firm $48,000 per year in before tax operating costs, mainly labor. The firms marginal tax rate is 30%.

1. What is the net outlay for the equipment?
2. What are the net cash inflows in years 1, 2, and 3?