Kinglake Ltd is considering a project to replace an existing machine with a new machine. The existing machine was purchased four years ago at a total cost of 100000 dollars and originally had a life of ten years. The new machine costs 110000 dollars and has installation costs of 10000 dollars.

The machine will be fully depreciated using the straight-line method over a six-year life. The old machine generates a revenue of 34000 dollars per year. The new machine with its higher productive capacity will generate a revenue of 76000 dollars per year. The maintenance cost of the old machine

is 5000 dollars per year whereas the new machine will have a maintenance cost of 1000 dollars per year. At the end of year six, the equipment will be sold for 30000 dollars. The company has a 34% tax rate. The appropriate cost of capital is 12%.

Answer the following questions (a) and (b). Note: For all the calculation questions, you are only allowed to write the numerical answer you calculated for the question, please DO NOT add $% dollars, million, thousand, percent, space, etc. in your answers.

(a): What is the amount of incremental after-tax free cash flows for year 1?

(b): What is the amount of incremental after-tax free cash flows for the last year (i.e., year 6)?