Weir's Trucking, Inc is considering the purchase of a new production machine for $150000. The purchase will increase earnings before interest and taxes of 60000 per year. To operate the machinery, workers would have to go through training of 4500 per year after tax and it would cost an additional 5500 after tax to install this machine correctly. The increase in inventory of 23000 because of its efficiency. Expected life span of 10 years. To purchase this the firm would have to borrow 90000 at 8% interest resulting in an additional 7200 in interest payments per year. Assume simplified straight line depreciation down to zero and a 36% tax rate and required rate of return of 15%.

a. WHat is the initial outlay?

b. What are the after tax cash flows for years 1-9?

c. WHat is the terminal cash flow in year 10? (annual after tax plus any additional cash flows)

d. Should this machine be purchased?