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You must evaluate a proposal to buy a new milling machine. The base price is $108,000, and shipping and installation costs would add another $12,500.

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You must evaluate a proposal to buy a new milling machine. The base price is $108,000, and shipping and installation costs would add another $12,500. The machine falls into the MACRS 3 -year class, and it would be sold after 3 years for $65,000. The applicable depreciation rates are 33%, 45%,15%, and 7%. The machine would require a $5,500 increase in net operating working capital (increased inventory less increased accounts payable). There would be no effect on revenues, but pretax labor costs would decline by $44,000 per year. The marginal tax rate is 30%, and the WACC is 12%. Also, the firm spent $5,000 last year investigating the feasibility of using the machine. What are the project's annual cash flows during years 1,2 and 3

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