Thoma Pharmaceutical Company is planning buy DNA-testing equipment costing $60,000. Delivery and installation cost of $20,000 This Equipment is expected to reduce labor costs of the clinical staff by $20,000 annually. The Equipment has a useful life of five years (Straight Line method to be used for Depreciation Purpose). In the end this machine has been sold at cash price of $10,000. The corporate tax rate for Thoma is 38 percent, and its required rate of return is 15 percent.

A) On the basis of above information what are the relevant cash flows?

B) In part-A, suppose that 6 percent inflation in savings from labor costs is expected over The last four years then how would be cash flows be alike?

C) If working capital of $10,000 were required in addition to the cost of the equipment and This additional investment were needed over the life of the project, what would be the Effect on the relevant cash flows calculated in Part-B of the Question?