4 C. (20 Marks)

A large store is deciding whether to install a machine in each of its store. Each machine costs $250,000. Projected income per machine is as follows:

Year	1	2	3	4	5
Sales	200,000	300,000	300,000	250,000	250,000
Operating Expenses	200,000	200,000	200,000	200,000	200,000
Depreciation	50,000	50,000	50,000	50,000	50,000
Accounting Income	0	50,000	50,000	0	0

Why would the store continue to operate a machine in Years 4 and 5 if it produces no profits? What are the cash flows from investing in a machine? Assume each machine is completely depreciated and has no salvage value at the end of its 5 years life. Show all your workings and justify your answer.