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Question 9 Your company is considering a machine that will cost $1,000 now (Year 0). The machine can be sold after 3 years for $100. To operate the machine to generate sales revenues, $200 must be invested at Year 0 in inventories; these funds will be recovered when the machine is retired at the end of Year 3. The machine will produce sales revenues of $900/year for 3 years; variable operating costs (excluding depreciation) will be 50 percent of sales. Operating cash flows will begin 1 year from today (at Year 1). The machine will have depreciation expenses of $500, $300, and $200 in Years 1, 2, and 3, respectively. All cashflows happen at the end of the periods. The company has a 40 percent marginal tax rate and the government gives tax credit at 40 percent rate when the company incurs a loss. Financing of this investment project will be 30% debt and 70% equity throughout the life of the project. The company's historical average cost of debt is 9.6% but will be 8.9% going forward due to the declining interest rate environment. The company's cost of equity is expected to remain 12.0 % as in the past and inflation is zero. Based on the project's NPV, should the company invest in this machine? (15 marks)