1. Your company is purchasing a $850,000 machine. It will cost $14,000 to transport and install the machine. The machine has a depreciable life of four years and will have no salvage value. If you use straight-line depreciation

2. Daily Enterprises is purchasing a $700,000 machine. It will cost $50,000 to transport and install the machine. The machine will be depreciated to zero using straight line depreciation over its 5-year life. The machine will generate incremental revenues of $1 million per year along with incremental costs of $400,000 per year. If Daily's marginal tax rate is 35%, what are the incremental earnings (per year) associated with the new machine?

3. You purchased a machine for $100,000 three years ago and have been applying straight-line depreciation to zero for a five-year life. Your tax rate is 35%. If you sell the machine today (after three years of depreciation) for $70,000, what is your incremental cash flow from selling the machine?

4. You have been asked by the president of your company to evaluate the proposed acquisition of a piece of new equipment for the firm's R&D department. The equipment's price is $30,000, and would be sold after 2 years for $5,000. The equipment is depreciated straight-line to zero over 2 years. Use of the equipment would require an increase in net working capital (spare parts inventory) of $4,000, which will be recovered when the equipment is sold. The equipment is expected to generate sales of $35,000 per year and operating costs (excluding depreciation) by $10,000 per year. The firm's marginal tax rate is 40%.

a) What is the free cash flow of the project in Year 0?

b) What is the free cash flow of the project in Year 1?

c) What is the free cash flow of the project in Year 2?

d) What is the NPV of the project if the required return (cost of capital) of the company is 10%? Round your answer to the nearest dollar.