You must evaluate a proposal to buy a new milling machine. The purchase price of the mil ing machine, including shipping and installation costs, is 5136,000 , and the eculpment will be fully depreciated at the time of purchase. The machine would be sold after 3 years for $56,000. The machine would require a $3,500 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 346,000 per yeac. The marginal tax rate is 25%, and the WACC is 10%. Also, the firm spent $4.500 last year investigating the feasibility of using the machine. a. How should the $4,500 spent last year be handed? 1. Only the tax effect of the research expenses should be included in the analystis: II. Last year's expenditure should be treated as a terminal cash flow and dealt with at the end of the project's life. Hence, it should not be ineluded in the initial iavestment outlay, IIt. Last year's expenditure is considered an opportunity cost and does not represent an incremental cach flow. Hence, it should not be included in the analysis: TW. Last year's expenditure it considered a sunk cost and does not represent an incremental cash fow. Hence, it should not be included in the analysis. v. The cost of research is an incremental cash flow and Mrould be included in the analysis. b. What is the initial investment outlay for the machine for capital budgeting purposes after the 100\%i bonus depceciatien is considered, that is, what is the Year o project cash finw? Enter your answer as a positive value. Round your answer to the nearest dollari 5 c. What are the project's annual cash flows during Years 1,2 , and 37 Do not round intermed ate calculations. Round your answera to the nearest coliari; Year 1:51 Year 2: 5 Year 3: 5 d. Should the machine be purchased