You must evaluate a proposal to buy a new machine. The base price is $101,000, and shipping and installation costs would add another $16,000. The machine falls into the MACRS 3-year class, and it would be sold after 3 years for $70,700. The applicable deprecation rates are 33%, 45%, 15%, and 7%. The machine would require a $6,000 increase in net operating capital. there would be no effect on revenues, but pretax labor costs would decline by $58,000 per year. The marginal tax rate is 35%, and the WACC is 11%. Also, the firm spent $4,500 last year investigating the feasibility of using the machine.

1. What is the initial investement outlay for the machine for capital budgeting purposes, that is, what is the year 0 project cash flow? Enter your answer as a positive value. Round your answer to the nearest cent.

2. What are the projects annual cash flows during the years 1, 2, and 3?

3. Should the machine be purchased?