54 must evaluate a proposal to buy a new miling mschine. The putchase price of the miing machine, induding shipping and installetion conth, is 5136 , 000, and the equigmtert wit fuly geprecated at the time of purchase. The machise would be sold after 3 yeass for 174,000 . The machine would require a s6,000 increase in net operatiog working casital nereased inventery iess increased accounts payatie). There would be no elfect on revenues, but pretar laber costs would decline by 160,060 per yeac. The mayiral tax rate is 54 , and the Wace is 9%. Ase, the fers spent $4,500 avt year investigating the fessiblity of uning the machine a. How should the $4,500 spent last year be handed? 1. The cost of research is an incremental cash flow and should be included in the analysis, 11. Orly the tax effect of the research expenses should be induded in the analysis. 1th. Last year's expenditure showid be treated as a terminal cash fiow and gealt with at the end of the progect's life. Mence, if atould not be induded in the initiat investiment outlay N. tast year's expendzure is coesidered an opportunity cost and does mot represent an incremental cash fiow. Hence, it should not be indudes in the analysis. V. Last year's expenditure is considered a sunk cost and dses not represent an incremental cash flow. Hence, is sheuld not be included in the analysis: b. What is the ivitial investment butiay for the machine for capikal budgeting purposes after the 100\% bonus deprecietion is considered, that it, ahat is the Vear o praject cash flow? Enter your answer as a postive value. Round your enswer to the neorest doliar. b) c. What are the croject's senual cash fows during Years 1, 2, and 37 Do not round intermediate calculations, klound rour andwers to the nearest dolar. year 1: 5 Year 2: 5 veet 3:5 d. Shituld the machine be gurchased