Finance Review Sheet Chapter 12 As the analyst in a private finance company in the Cayman Islands you have been asked to evaluate the purchase of a piece of machine for the production department. The base price of the machine is $240,000, it will take another $60,000 to install and test this machine. This equipment falls under the MARCS 5-year class and could be sold after 5 years. This machine is expected to generate revenues of $100,000 per year with operational cost levelling at $40,000 every year for 5 years. After 5 years the operational cost will increase. No increase in working capital is necessary for this machine. The firm's marginal tax rate is 35%. The MACRS table show the following rates. 20, 32, 19, 12, 11, 6. (Tables are provided please ensure that you use them) Required: a) The initial investment outlay for the machine, that is what is year 0 project cash flow? (5 points) b) What is the annual cash flows in years 1, 2, 3, 4, 52 (15 Points) c) Given a WACC of 10%, should the machine be purchased? Explain why you would or would not purchase the machine. (5 points)