You must evoluate a proposal to buy a new milling machine. The purchase price of the milling machine, including shipping and installation costs, is $104,000, and the equipment will be fully depreciated at the time of purchase. The machine would be sold after 3 years for $59,000. The machine would require a $4,000 increase in net operating working capital (increased inventory less increased accounts payable). There would be no effect on revenves, but pretax labor costs would decline by $58,000 per yeac. The marginal tax rate is 25%, and the WACC is 9%. 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 handled? 1. The cost of research is an incremental cash flow and should be included in the analysis. 11. Only the tax effect of the research expenses should be included in the analysis. 11.. Last year's expenditure should be treated as a terminal cash Now and dealt with at the end of the project's life. Hence, it should not be included in the inkial investment outiay IV. Last year's expenditure is considered an opportunity cost and does not represent an incremental cash flow. Hence, it should not be included in the analysis. v. Last year's expenditure is considered a sunk cost and does not represent an incremental cash flow. Mence, it should not be included in the analysis. b. What is the initial investment outiay for the machine for capital budgeting purposes after the 100\% boous depreciation is considered, that is, what is the Year 0 prolect cash flow? Enter vour answer as a positive value. Round your answer to the nearest doliar. c. What are the peolect's annubl cash fows during Years 1, 2, and 3 ? Do not round intermed ate calculations, found your answers to the nearest doilar. Year 1/3 rear 215 rear 311 d. Shouid the machine be purchased