you have been asked by the president of the Farr Construction company to evalute the propsed acquisition of a new earth mover. The mover's basic price is $50,000. and it would cost another $10,000 to modify it for special use. Assume that the mover falls into the MACRS 3 years class, that it would be sold after 3 years for $20,000 and that it would require an increase in net working capital (spare part inventory) of $2000 at the start of the project. This working capital will be recovered at year 3. The earth mover would have no affect on revenue. But it is expected to save the firm $20,000 per year before tax operating costs, mainly labor. The firm marginal federal plus state tax rate is 40%.

a. what are the year 0 cash flow?

b. what are the operating cash flows in years 1,2 and 3.

c. what are the addtitional nonoperating cash flows in year 3?

d. if the projects cost of capiatl is 10% should the earth movers be purchased?