You must evaluate a proposal to buy a new milling machine. The purchase price of the miling machine, including shippling and inatelation costs, is str2,000, and the equipment will be fully depreciated at the time of purchase. The machine would be sold after 3 years for 57 , 000 . The machine nould requirs a 53,500 increase in net operating vioriding [ncreased inventory less increased accounts payable). There would be no effect on fevenues, but pretax labor costs would decline by $42,000 per yeac. Narginal tax rate is 25%, and the wacc is 12%. Aso, the firm spent $4,500 last year investigating the feasb iry of using the machine: a. How should the $4,500 spent last year be handled? 1. Only the tax effect of the research expenses should be included in the analysla. II. Last year's expenditure should be treated as a terminal cash flow and dealt with at the end of the project's ife. Hence, it should net be included in the Initial investment outlay. III. Last year's expenditure is considered an opportunity cost and does not represent an incremental cach fow. Hence, it should not be included in the analysis. IV. Last year's expenditure is considered a sunk cost and does not represent an incremental cash flow. Hence, it should not be included in the antysis. V. The cost of research is an incremental cash flow and should be included in the analysis. b. What is the initial investment outlay for the machine for capital bucgeting purposes after the 100 bhe be 3 c. What are the oroject's annual cash flows during Years 1,2 , and 3 ? Do not round intermediate calculations. Round your answers to the nearest dollar Year 1: $ year 2:5 Year 3:5