You must evaluate a proposal to buy a new miling machine. The use price is $107,000, and shipping and installation costs would add another $12,000. The machine falls into the MACRS 3 year dess, and it would be sold after years for $69,550, the applicable depreciation rates 33%, 45%, 15%, and the machine would require a $5,500 increase in niet operating working capital increased inventory less increased accountable). There would be no offect on event, but ratators would decline by $56,000 per year. The marginal tax rate 535%, and the WACC 125. Also, the firm spent 14.500 last year investigating the fility of sing the machine a. How should the $4.500 spent a year behandled 1. Last year's expenditure should be treated a terminal cash flow and dealt with at the end of the project's We Hence, it should not be included in the initial investment outlay 11. Last year's expenditure is considered an opportunity cost and does not represent an incremental och flow. Hence, should not be included in the analysis. III. year's expendture is cooidered a sunk cost and does not represent an incremental cash flow. Hence, it should not be included in the analys IV. The cost of research is an incremental cash flow and should be included in the analysis Only the tax effect of the research expenses should be induded in the analysis. 1. What the initial investment outlay for the machine for capital budgeting purposes, that is what is the Year a project cash flow enter your anwer as a positive values, Round your wwer to the nearestent $ . What are the pren's and cash flow during Years 1, 2, and 97 De not round intermediate calculation, Hound your owers to the nearest cent Yeart Years Year 318 Sheld the machine be purchased