Your company is considering a five-year project of buying a new machine press to improve its production efficiency. Buying the new machine press for $460,000 is estimated to result in $142,000 in annual pretax cost savings. This press will be depreciated straight-line to zero over the projects five-year life, at the end of which the press can be sold for $59,000. The press also requires an initial investment in spare parts inventory of $32,000, along with an additional $3,800 in inventory for each succeeding year of the project. The shops tax rate is 21 percent, and its discount rate is 12 percent.

(a) What is the depreciation value for this machine each year? (3 points)

(b) What is the after-tax salvage value of this machine press? (4 points)

(c) What would be the operating cash flow (OCF) each year? (4 points)

(d) Calculate CFFA each year. (8 points)